WINNING THE BUDGET BATTLE

 

[Published in the Sunday Guardian of India and Newsmax]

The best way to effectively end waste and rein-in government spending is to have the U.S. Supreme Court declare the Congressional Budget and Impoundment Control Act of 1974 (Public law 93-344) unconstitutional.

America’s public debt is currently $36.22 Trillion. It was only $475 billion when the Congressional Budget Act became law in 1974.

The Congressional Budget Act created the current framework within which the Federal Budget is proposed, passed, and implemented.  It placed Congress firmly in the driver’s seat, and blocked future President’s from taking actions deemed constitutional and prudent for over 171 years.

The result was instant and dramatic.  In the six years prior to the 1974 Act, the federal budget increased on an average of $13.4 billion annually.  In the seven years after the Act, the federal increased by over $49 billion annually.

The Peterson Foundation for the study of the National Debt observed: “From 1950-1974, federal deficits averaged 0.7% of GDP. After the Congressional Budget Act was adopted, from 1975-2007, deficits averaged 2.5% of GDP. And when the Congressional Budget Act was enacted in 1974, real (inflation-adjusted) U.S. government debt per person was $3,240.”

Today, U.S. Government debt is $106,024 per person.

Expanding Presidential power usually erodes democracy, expands government, and facilitates the rise of an increasingly unaccountable “Imperial Presidency”.  Ironically, giving Presidents more power to control spending would do just the opposite.

The struggle over government spending has been a fundamental point of contention since the earliest days of our Federal Government.

Article I of the U.S. Constitution outlines the power of Congress to create laws [Sections 1 & 8] and the prevailing nature of those laws once signed by the President or passed over a Presidential Veto [Section 7].
Article II of the U.S. Constitution vests all executive power in the President of the United States [Section 1].

This division of power and responsibility was validated by Chief Justice John Marshall in 1825, "the difference between the departments undoubtedly is that the legislature makes, the executive executes, and the judiciary construes the law." [Wayman v. Southard, 23 U.S. 1, 44 (1825)]

Earlier, Chief Justice Marshall, in his famous Marbury v. Madison, defined the difference between political acts belonging to the executive branch alone as opposed to those executive acts governed by congressional enactments: “He acts, in this respect.., under the authority of the law, and not by instructions of the President.  It is a ministerial act which the law enjoins on a particular officer for a particular purpose...”
[Marbury v. Madison, 1 Cranch 137, 5 U.S. 137, 2 L.Ed. 60 (1803)]

However, what happens if Congress creates programs that eventually become unnecessary or obsolete? What happens if Congress continues to authorize and appropriate funds for those programs? What happens if Congress provides more funds than recommended by the Executive Branch or exceeds documented need?

President Thomas Jefferson was the first to test the boundaries of Executive authority to second guess Congressional spending. In the wake of the 1803 Louisiana Purchase, Jefferson reported that, "the sum of $50,000 appropriated by Congress for providing gunboats remains unexpended. The favorable and peaceful turn of affairs on the Mississippi rendered an immediate execution of that law unnecessary.... "

Following Jefferson’s precedent, subsequent Presidents selectively withheld appropriated funds on programs that were no longer needed. They also asserted they were effectuating congressional intent not circumventing it.

The Depression and World War II provided opportunities for President Franklin Roosevelt to stretch budgetary discretion beyond Jefferson’s “economy” precedent. He moved funds away from what he deemed less important programs to more pressing programs. Post war demobilization gave President Harry S. Truman additional opportunities to hold back Congressional spending. Truman impounded $735 million in additional funds appropriated by Congress to increase to 58 from 48 the President's request for Air Force groups.

This expanded justification for Presidential Impoundment of Congressional funds became bi-partisan when President Dwight D. Eisenhower, set aside $137 million appropriated for the initial procurement of Nike-Zeus anti-missile system hardware. John F. Kennedy impounded $180 million appropriated by Congress over the President's request for developing the B70 Bomber. Lyndon B. Johnson unilaterally decreased federal spending by $5.3 billion to mitigate the inflationary impact of the Vietnam War.

Congress initially supported the President’s role in managing public funds. The Anti-Deficiency Act of 1905 provided that appropriations may, “… be so apportioned by monthly or other allotments as to prevent expenditures in one portion of the year, which may necessitate deficiency or additional appropriations to complete the service of the fiscal year for which said appropriations are made."

The Revised Anti-deficiency Act of 1906 stated: "Whenever it is determined...that any amount so reserved will not be required to carry out the purposes of the appropriation concerned, he [President] shall recommend the rescission of such amount ..."

President Warren Harding’s Budget Bureau Director, Charles E. Dawes, further asserted that an agency was not required to spend its total appropriation if it could fulfill its objectives by spending a lesser amount.

Omnibus Appropriations Act of 1951, continued to expand Presidential flexibility on managing and controlling spending: “In apportioning any appropriations, reserves may be established to provide for contingencies or to affect savings whenever savings are made possible through changes in requirements, greater efficiency of operations, or other developments subsequent to the date on which such appropriation was made.”

Legislative liberals began to challenge Presidential spending control.  Congressman George H. Mahon (D-TX) raised concerns regarding the passage of the 1951 Act: "I would not object, as I know other members would not object, to any reasonable economies in government. But economy is one thing, and the abandonment of a policy and program of Congress is another thing."

Recipients of federal funds began to challenge Presidential control of spending.  The Supreme Court, led by Chief Justice Earl Warren, began to constrict Presidential impoundment and other executive branch practices to control spending. 

These new battle lines hardened when President Richard Nixon mounted a more aggressive and effective effort to rein-in federal spending.  The Supreme Court, even under centrist Chief Justice Warren Burger, continued to build legal precedents against Presidential budget frugality.

“Article I, Section 1, of the Constitution vests "[a]ll legislative powers" in the Congress. No budget message of the President can alter that power and force the Congress to act to preserve legislative programs from extinction prior to the time Congress has declared that they shall terminate, either by its action or inaction.... Thus, in absence of any contrary legislation, the defendant's plans to terminate the CAA functions and the OEO itself are unlawful as beyond his statutory authority.” [American Federation of Government Employees v. Phillips, 358 F. Supp. 60 (1973)]

Nixon continued to impound congressionally appropriated funds. During the 1973-1974 budget year, Nixon refused to spend $12 billion. Congressional Democrats, sensing the decline in Presidential power in the wake of the mounting Watergate scandal, passed the Congressional Budget and Impoundment Control Act of 1974. Nixon signed the law on July 12, 1974, one of his final major acts in office.

After extinguishing the President’s ability to control spending the federal budget more than tripled in just ten years.  From $269 billion in Fiscal 1974 to $851 in Fiscal 1984. Annual federal spending is now $6.5 trillion.

When the Republicans retook the House of Representatives after forty years, Newt Gingrich tried to reassert the President’s role in budget management by proposing the Line-Item Veto.  This was a key part of his 1994 “Contract with America”. It became a rallying cry for fiscal “hawks” from across the political spectrum. Former President Ronald Reagan added his voice to the renewed effort: “When I was governor of California, the governor had the line-item veto, and so you could veto parts of the spending in a bill. The president can’t do that. I think, frankly—of course, I’m prejudiced—government would be far better off if the president had the right of line-item veto.”

The bill was introduced by Senator Bob Dole (R-KS) on January 4, 1995, cosponsored by Senator John McCain (R-AZ) and 29 other senators. Related House Bills included H.R. 147, H.R. 391, H.R. 2, H.R. 27 and H.R. 3136. The bill was signed into law by President Bill Clinton on April 9, 1996.

Budget “hawks” from both parties cheered, and President Clinton began using the line-item veto and budgets became balanced.  Senator Robert Byrd (D-WV), and others who opposed this “assault on Congressional prerogatives”, filed in court to void the law.  Their case was tossed out over lack of standing. Another case, filed by a city, succeeded in declaring the Line-Item Veto unconstitutional. [Clinton v. City of New York, 524 U.S. 417 (1998)]

On January 31, 2006, President George W. Bush proposed the “Legislative Line-Item Veto Act of 2006”.  Conservatives once again rallied to giving the President expanded budgetary powers. It was introduced in the House by Rep. Paul Ryan (R-WI) and passed overwhelmingly on June 22, 2006. However, the Senate killed similar legislation.

Elon Musk’s Department of Government Efficiency (DOGE) reveals daily evidence of how unbridled government spending wastes billions while lining the pockets of favored contractors and corrupt officials.

America is already barreling toward bankruptcy. Reestablishing the constitutionality of the President’s power to control spending is the only way to save us.

The Budget Bunker

President Obama has the Republicans, and the nation, right where he wants them. Everyone is talking about how budget cuts hurt people.

Obama has embraced the advice given by his first chief of staff, Rahm Emanuel, “You don’t ever want a crisis to go to waste; it’s an opportunity to do important things that you would otherwise avoid.” The Sequester was not supposed to have happened. Now that it has, Obama and the Democrats are doing all they can to eradicate opposition to government’s eternal growth.

The Sequester was supposed to be the “mutually assured destruction” of sacred cows for both Democrats and Republicans. This intentional apocalypse was designed to force all sides in the budget debate to find common ground. However, in the summer of 2011, both sides assumed they would completely triumph in the November 2012 elections. This would have given either side the ability to move their agenda unfettered by their opponents. The electorate voted to maintain the status quo, leaving gridlock and the Sequester to move all sides to a crisis of their own making.

The Democrats figured out how to make gourmet lemonade from this pile of lemons, while the Republicans retreated into their Budget Bunker.

Democrats had the home field advantage. They had just spent two years painting Republicans as only interested in protecting the very wealthy. They also spent months building their case that the only thing wrong with the Federal Government was that it did not have enough money. The expiration of the Bush era tax cuts on January 1, 2013 allowed the first post-election battle to occur on turf most friendly to Democrats. Republicans were forced to give ground or lose all their ground on the revenue issue.

Sequester visuals also favor the Democrats. There are plenty of compelling back drops for scaring people into believing soldiers, first responders, teachers, daycare workers, and park rangers are going to vanish. Even though the actual Sequester legislation, the Budget Control Act of 2011, only sets general budget targets, both sides agreed to implement the bureaucratic equivalent of losing weight by cutting off fingers instead of dieting.

Republicans could have countered all of this. They had the capability. Senator Tom Coburn’s annual Waste Book detailed many ways to reduce hundred of billions in government spending without pain. Agency Inspector Generals and the Government Accountability Office (GAO) publish over 9,500 reports a year detailing over $650 billion in waste, fraud, and abuse. However, the GOP remains in their Budget Bunker, content to fall into the sequester impact trap by scrabbling to move funds around and making overly vague pronouncements about spending.

There are other missed opportunities. The Executive Branch normally has attrition of 60,000+ employees a year. Much of this occurs due to retirement. Currently, the Office of Personnel Management (OPM) has a retirement processing backlog of 41,103. There were an additional 20,374 retirement applications just in the month of February. This acceleration of aging and retiring federal civilian workers provides an historic opportunity to rethink positions and reduce costs. Does every retired worker need to be replaced? Is every layer of management (up to 23 layers in some agencies) really needed in the 21st Century? Can functions and offices be consolidated as staffs dwindle and information age technology improves span of control for supervisors?

The answer to all these questions is yes. However, only a few Republicans, notably Senators Tom Coburn and Rand Paul, are drawing attention to vacancies being posted since the Sequester. However, even here Republicans miss the point. They offer up low level front line positions for a hiring freeze when they should also be blocking new senior executives and managers who would not be missed and generate far more savings.

Republicans are squandering their precious few on air moments. There is no message discipline. What common points they do make either offer up conspiracy theories, blamestorming, or finding ways to protect the Defense Department. They refuse to admit that the Defense Department is just another bloated bureaucracy. By spending time protecting DOD waste they prove Obama’s case that any cut, not matter what size, is harmful.

Obama is playing the long game. He is not just looking at shaping the 2014 battlefield or even the 2016 one. Obama and the Democrats are using Sequester, and all the other budget battles, to reverse the Reagan Revolution. Reagan strategically shifted America’s political landscape when he declared, "Government is not the solution to our problem; government IS the problem." With every comment, every action, every minute, Obama and the Democrats are countering this with “Government is not just the solution to our problem it is our salvation for everything.”

Republicans need to leave their bunker and start offering up ideas and solutions that appeal to common sense and common ground.

Fear & Loathing in Washington, DC

The Executive Branch refuses to acknowledge that it has broad latitude on how to implement the Sequester. This may be good politics, but it is a disservice to our country. Gaming the system will not solve America’s fiscal problems or promote collaboration over combat.

[1] Gaming the system - Level 1
Under the Budget Control Act, the Federal Government can ignore the Sequester, for now.

The Sequester only happens if, at the end of a fiscal year, spending exceeds designated levels under the Budget Control Act. Therefore, the Sequester does not happen on March 1, 2013 but later, when it is necessary to, “eliminate a budget-year breach”. There are six months to cut spending and avoid the Sequester.

[2] Gaming the system - Level 2
There is no immediate “day of reckoning”.

The impact of the Sequester will not be felt until July for most jurisdictions and late August when schools start their next academic year. Federal funds for teachers, police, and many grant programs are sent to the states annually or quarterly. State governments then disburse these funds, matched with state and county contributions, to these services. States, counties, municipalities, and school districts start their fiscal year on this coming July 1, 2013 not last October 1, 2012.

[3] Gaming the system - Level 3
The “day reckoning” can be avoided using normal OMB methods.

Agencies spend their funds unevenly as contracts, travel, and personnel actions occur sporadically during the fiscal year. If everything was evenly paced, 25% would be left unspent on July 1 (to cover the final three months of a fiscal year - July, August, September). Unevenly paced spending can leave as much as 40% unspent in some agencies on July 1.

OMB provides budget guidance in June telling each agency how much they have left to spend. Agencies accelerate their fourth quarter spending to spend everything they have. If they don’t do this the excess money is returned to the Treasury, and the agency may have trouble justifying future spending increases. Imagine if remaining balances exceeding 25% were returned to the Treasury on July 1 – Sequester solved!

[4] Gaming the system - Level 4
A budget sweep could prevent Sequester now and for the next six years.

OMB could at any time conduct a budget sweep to reclaim unexpended civilian balances among revolving funds and contingency funds. That would bring $687 billion back to the Treasury for the current fiscal year. That is over half the entire ten year Sequester or 13 times more than the current fiscal year Sequester. Sequester solved!

[5] Gaming the system - Level 5
OMB could enforce its own guide lines and avoid the Sequester completely.

OMB uses a Current Services Analysis for modeling what it costs to maintain exactly the same level and scope of services in the next year’s budget. For decades agencies have been funded well above their CSA levels. The budget battles are always over how much to increase spending. They are never about cutting or even maintaining CSA levels. In the current CSA the Sequester actually creates a net $110 billion increase in federal spending over the next ten years. Enforce CSA levels and Sequester solved!

[6] Gaming the system - Level 6
Freezing federal hiring would meet all budget limits and end the Sequester!

By properly managing personnel actions the Budget Control Act targets could be reached in three years instead of ten with no furloughs. Currently there are over 4,900 vacancies among domestic agencies and our government still operates. There is currently another 1,358 civilian vacancies in the Department of Defense and we are safe. Salaries and benefits for just these vacancies total approximately $62 billion/year for domestic agencies and $17.4 billion/year for Defense. In a typical year an additional 29,000 positions become vacant government-wide. This means that over $350 billion in personnel costs could be avoided if hiring was frozen. Some positions may be deemed critical and necessary for filling, but the vast majority of federal vacancies serve Americans better by remaining vacant.

As each hour passes, politicians and pundits are ratcheting up their rhetoric. They need to stop pointing fingers and wringing hands. It is time to make real decisions based on facts.

It is time to be statesmen, not showmen.

Scot Faulkner is a former chief administrative officer for the U.S. House of Representatives. His articles on government reform appear at citizenoversight.blogspot.com

Debunking Doomsday

The drumbeats of doom are echoing across Washington, DC. Every day the apocalyptic vision of The Sequester looms larger as the clock ticks down to Midnight on February 28.

Conservatives are filling the air waves and the Internet with the horrors of how The Sequester will hollow out the Defense Department and leave America prostrate to a dangerous world. Liberals are countering with their own tales of teachers out of work, parks closed, and the social safety net torn asunder. Both sides are spewing out millions of emails detailing how The Sequester will end life as we know it and wreck America’s economy beyond repair. The media has likened The Sequester to releasing the Kraken and to an asteroid barreling towards the earth.

What is the truth behind these shrill warnings?

What is The Sequester?
In the summer of 2011, the Obama Administration, along with Democrats and Republicans in Congress, decided that the only way to break the strategic deadlock on the budget was to create The Sequester. It was the centerpiece of the Budget Control Act (BCA). It created highly prescribed cuts to the Federal Budget that were designed to be so horrific that no one would ever want them to occur.

How bad is it?
Very, very bad. The Sequester creates deep and detailed cuts to the front line services and operations of every Department and program. The cuts are intentionally designed to inflict immediate and catastrophic damage to the workings of the Executive Branch and to the American economy. This is detailed in http://citizenoversight.blogspot.com/2012/12/fiscal-flim-flam.html

So they created their own doomsday?
Yes. Strange as it may seem, America’s political leaders felt that the only way to stop political brinksmanship over the budget/debt/deficit was to create the ultimate brink. They hoped that the mutually assured destruction of everyone’s sacred cows (conservatives – Defense; liberals – domestic programs; Obama – his economic recovery) would create a spirit of compromise leading to a reasonable and balanced solution. Everything backfired.

What went wrong?
All sides in the budget/debt/deficit battle assumed a reasonable solution would only happen when the other side blinked. No one blinked. The Sequester, instead of avoiding brinksmanship, created a worse one. This is detailed in http://citizenoversight.blogspot.com/2012/12/madness.html

Can this be avoided?
Of course. Think of the iconic scene in “Blazing Saddles”. The new sheriff, when faced with angry townspeople ready to kill him, places his own gun against his head and takes himself hostage. In a low voice he screams, “Nobody move!”, while in a high voice he screams, “Help me!” He walks away from the mob and escapes to safety.

In the case of The Sequester, everyone is circling each other holding guns to their own heads. They are all threatening to shoot themselves and all are screaming for help. It is ridiculously surreal, made more so as everyone (including the media) is showing the public only the gun to the head, not the fuller picture of them doing it to themselves.

On January 1, 2013, the first Sequester deadline approached. Congress and the President simply delayed their self-imposed doomsday to the end February. They can vote to reset their own doomsday clock at any time or disable it completely.

So why don’t they?
Everyone still thinks someone else is going to blink. Democrats are “doubling down”, dismissing overspending while demanding more “investments”. The Democrats have become “debt deniers”. Former Speaker Pelosi denies there has ever been a spending problem. Senator Landrieu says spending is a fiction perpetuated by Fox News. Minority Leader Hoyer explains it is not about spending, but about paying for the spending.

Republicans are countering with warnings about America being disarmed and how the economic recovery (which they now admit may be happening) will vanish. GOP strategists are saying that they have Obama right where they want him – forced to make spending cuts to save his recovery. This is delusional. The Sequester will create so much documented pain so fast that the “debt deniers” will say, “See what happens when you cut spending. We can’t cut one dime without terrible consequences. So let’s move on to more spending and more taxes!”

Republicans are so self-involved they don’t realize they are in their own trap. This is detailed in http://citizenoversight.blogspot.com/2013/02/republican-opportunities-lost.html and http://citizenoversight.blogspot.com/2013/01/wasted-day-and-wasted-nights.html

Is there a way out?
Yes. Republicans can offer to revoke The Sequester in exchange for Obama conducting a “budget sweep”. This will immediately bring $687 billion in unexpended and unobligated funds back into the Treasury – nearly balancing the FY2013 budget. Republicans should also require a full scale review of $1.3 trillion in additional unexpended funds that reside in various accounts and reclaiming as much as is possible.

This allows everyone to declare immediate victory and eliminates The Sequester. With universal victory and The Sequester gone everyone can sober-up and consider real and lasting solutions to the budget/debt/deficit.

What are those real solutions?
The bi-partisan Simpson Bowles Report, issued on December 1, 2010, and countless other reports recommend entitlement reform as the only action that will really keep America from sailing over a real financial cliff. Such complex reform will take statesmanship instead of showmanship. It will also take time for politicians to move from combat to collaboration.

The way forward is for everyone to get used to working together by tackling less controversial matters. Think of a couch potato wanting to run the marathon. The first step is to walk a half mile and slowly build-up to running 26 miles. This newly minted athlete creates mini-milestones and celebrates them to maintain their momentum toward their larger goal.

For Democrats, they should cede to Republicans that there is at least a management problem with government that causes over spending. Republicans need to admit that this management problem exists every where, including the Defense Department. There are plenty of opportunities for mini-milestones amounting to over $650 billion a year in savings that can either be reallocated or applied to the deficit. There is something for everybody. These are detailed in http://citizenoversight.blogspot.com/2013/02/9528-opportinies-ignored.html

For Republicans, it is time to clean-up the Tax Code. Major reforms, like a Flat or Value Added Tax, are not in the cards, for now. Instead, go after the most heinous loopholes and ridiculous subsidies. Eradicating special interest tax breaks will generate upwards of $1 trillion in revenue over the next ten years without harming wage earners. In fact, Republicans could have been heroes by working on these all along, as tax legislation always starts in the House. This is detailed in http://citizenoversight.blogspot.com/2012/12/raising-revenue-responsibly.html

Is there any hope?
No. Politicians and the Media do not want to hear the truth or the solutions. The Sequester is too good a story. It helps further everyone’s myopic agendas, none of which are designed to help America or Americans. The media, both liberal and conservative, loves a countdown clock. The Sequester will generate more viewers and readers if things go poorly.

Therefore, it is time for concerned citizens to storm these citadels of cynicism with facts, before the clock strikes midnight.