Hearings of the
Subcommittee on Legislative and Budget Process
The Rescissions Process After the Line Item Veto: Tools for Controlling Spending
Deputy Director, Office of Management and Budget
Chairman Goss, Ranking Minority Member Frost, and distinguished Members, thank you for inviting me to testify on the existing rescission process and on the subject of enhanced rescission. In your invitation, you requested my assessment of the current rescission process – its history, mechanics and its effectiveness, as well my judgment about its ability to foster accountability and fiscal discipline.
I welcome the opportunity to be here. Fostering accountability and fiscal discipline are as important today, when the Federal budget is in surplus, as they were during the deficit years. Regardless of whether there is a budget surplus or deficit, the Federal government should always use taxpayer dollars wisely.
This hearing addresses one of the tools available to the Congress and the Executive Branch for fostering accountability and fiscal discipline. Through the rescission process, the President can identify to Congress particular uses of taxpayer dollars that are wasteful or unneeded or that serve special interests rather than the national interest. In my testimony, I will discuss the current process and proposals for its improvement. In this regard, I should note that the Administration, in the President's Budget for Fiscal Year 2000, has stated that enhanced rescission authority "would be a useful tool for the President and Congress in their efforts to ensure the effective use of taxpayer dollars."
CURRENT LAW
As your invitation requested, I would first like to describe the current rescission process. The President's existing rescission authority was put into place 25 years ago, and is contained in the Impoundment Control Act of 1974. Passed by Congress in response to President Nixon's impoundment of appropriated funds, the Act reinforces the congressional "power of the purse." The Act does so by requiring the President to obtain the approval of both Houses of Congress, through the enactment of a law, before appropriated funds may be permanently withheld.
I will briefly summarize the statutory framework. Under the Impoundment Control Act, the President can send a request to Congress asking that it rescind budget authority. The President can submit a rescission package at any time, and he may propose that "all or part of any budget authority" be rescinded. The Congress has 45 legislative days to consider the President's request, during which time the President may withhold the amounts proposed for rescission. In order for the proposed rescissions to become permanent, Congress must enact a law making the rescissions. If Congress does not enact a rescission law during the 45-day period, then the rescission proposal has been defeated and the President must release any withheld funds.
An important feature of the current process is that Congress is not required to vote on the President's request. When the President sends up a rescission package, if the committee does not report it, the only method provided to require a vote is through a discharge motion supported by one-fifth of the House. Otherwise there is no mechanism to require a vote on the President's proposals. Since 1974, Congress frequently has not voted on the President's proposals. This means that many opportunities have been lost for Members of Congress to go "on the record" and vote "up or down" on whether they support spending which the President has proposed for rescission.
As a result, the current rescission process is not as effective as it could be. As Congress noted three years ago, in the Conference Report to the Line Item Veto Act, "the statutory provisions of the Impoundment Control Act have proven too restrictive."
EARLIER ENHANCED RESCISSION BILLS AND THE LINE ITEM VETO ACT
Because of the problems inherent in the current rescission process, there have been many calls over the years for the President to have enhanced rescission authority. One form that these proposals took is the line-item veto. From the beginning of his Administration, President Clinton asked for a line-item veto. As the President stated in February 1993, in A Vision of Change for America, he intended to work with Congress to obtain a line-item veto "that will enable a President to reject wasteful items from an appropriations bill and will require the Congress to cast a separate vote on those items. Items that have broad support will survive; but over time millions, perhaps billions, of dollars will be saved by the defeat of items without broad support."
During the next few years, Congress considered a variety of enhanced rescission and line-item veto approaches. In addition, the President made numerous statements in support of a line-item veto, and OMB Directors Panetta and Rivlin testified before Congress, providing the Administration's views on the Impoundment Control Act and pending legislation to reform it.
There have been a number of approaches to improving the rescission process in the Impoundment Control Act with several common features: broader scope beyond budget authority and requiring Congress to vote on Presidential rescission proposals.
One approach was to replace the ineffective discharge-petition process with congressional "fast track" procedures that would require Congress to vote on the President's rescission proposals. Another variation was the "separate enrollment" approach, which would require the enrolling clerks in the House and Senate to separately enroll each covered item in a bill. Each of these individual, separately-enrolled bills would then be presented to the President, who could exercise his constitutional veto authority with respect to any one, or all, of them. For each separately-enrolled provision that the President vetoed, Congress would be required to override the veto by a two-thirds vote in each House if it wanted to preserve the provision.
Another approach was the line-item veto. In March 1995, the President stated that he supported "the strongest possible line-item veto," and he stated that it "should be applied to the revenue as well as the spending sides of the budget, so that I can curb wasteful tax and spending provisions." Congress in the following year passed, and the President signed into law, the Line Item Veto Act. Under that Act, the President had 5 days, after signing a bill, to "cancel" discretionary budget authority, new direct spending, and targeted tax benefits. The President could only "cancel" an item in its entirety; he could not cancel parts of an item. However, in the case of discretionary budget authority, the President's authority was not limited to those spending items that were found in the text of the appropriations bill itself. As you know, spending is often not allocated in the statutory language of the appropriation bill, but instead is allocated by the authorization bill that governs the spending or by the committee reports or statement of managers for the appropriations bills. The Line Item Veto Act allowed the President to look to the authorization bills and appropriations reports and statements to identify spending items for cancellation. Therefore, the President could cancel funding for a project that was identified in a committee report, without having to cancel the much larger statutory appropriation out of which that project would be funded.
In perhaps its sharpest departure from the Impoundment Control Act, the Line Item Veto Act required Congress to enact a law in order to reverse the President's action. This was the opposite of the approach in the Impoundment Control Act, because a President's rescission would expire unless Congress agreed with the President and enacted the rescission into law. Under the Line Item Veto Act, when the President canceled a spending or tax item, Members had 5 days in which to introduce a "disapproval" bill to overturn the cancellation. The disposition of the disapproval bill was governed by "fast track" procedures. If Congress passed a disapproval bill, then that bill -- like other legislation -- would be subject to the President's constitutional veto. Therefore, if the President vetoed a disapproval bill, Congress would have to override the veto by a two-thirds vote in each House in order to restore the canceled spending or tax item.
The Line Item Veto Act went into effect on January 1, 1997. It was in effect for the next 18 months, until the Supreme Court declared the Act unconstitutional in June 1998. During that time, the President canceled 82 items: there were 79 cancellations of discretionary budget authority, 2 cancellations of targeted tax benefits, and 1 cancellation of new direct spending. The total savings from these cancellations was approximately $2 billion: $1.33 billion in discretionary spending, $472 million in targeted tax benefits, and $200 million in direct spending. In the case of the cancellations of discretionary budget authority, the vast majority of these cancellations were of projects that were earmarked in the committee or conference reports to an appropriations bill. With respect to one set of these cancellations, of 38 projects funded in the Military Construction Appropriations Act ($287 million), Congress responded to the President's cancellations by enacting a disapproval bill into law over the President's veto. For the remaining 44 cancellations, however, Congress did not vote in favor of a disapproval bill; in fact, no disapproval bill was ever introduced for many of those cancellations.
As you know, the Supreme Court in June of last year held that the Line Item Veto Act was unconstitutional. By a 6-3 vote, the Court held that the Act violated the Presentment Clause of the Constitution. In the Court's view, the President's cancellation authority constituted, in effect, the power to veto parts of a bill or, alternatively, the power to repeal legislation. Such authority was not consistent with the Constitution, the Court found, because the President may only veto a bill in its entirety, and legislation may be repealed only through the enactment of another law. In reaching this conclusion, the Court majority (but not the three dissenting Justices) rejected the Government's position that the President, when using his Line Item Veto authority, was not vetoing or repealing legislation but rather was carrying out the law, which authorized him to decide whether budgetary resources should be dedicated to the purposes in the particular spending or tax item or instead to deficit reduction.
As a result of the Supreme Court's decision, the remaining cancellations were reversed, and the spending and tax items went into effect. Moreover, this put the President back in the position of having to rely on the rescission authority in the Impoundment Control Act.
THE ADMINISTRATION SUPPORTS ENHANCED RESCISSION AUTHORITY
The question is, "where do we go from here?" As Directors Panetta and Rivlin noted in their testimony on enhanced rescission and the line item veto, the fact that a program is included in a larger bill does not always mean that a majority of Congress actively approved the program. Requiring a second vote on certain items is a reasonable response to the realities of the legislative process. The existing rescission process is not as effective as it could be because Congress is not required to vote on the President's rescission packages, but can simply take no action on them.
We believe that the Congress should vote on a President's rescission proposal, and that is what an enhanced rescission authority would provide: an expedited schedule for Congressional consideration of the President's proposal, requiring an up-or-down vote within a reasonable period. Such enhanced rescission authority would preserve the power of congressional majorities to make budgetary decisions. An enhanced rescission would give the President a more meaningful opportunity to present Congress with rescission proposals and to persuade Congress to enact them. If the President is unable to persuade a majority of each House to vote for his proposal, then it will be defeated. Because the power to rescind remains with Congress, such enhanced rescission authority is fully consistent with the Constitution's Presentment Clause and the Supreme Court's decision in the Line Item Veto case.
It is worth emphasizing this point. The Administration respects the role of the congressional "power of the purse" in our system of government, and understands the desire of Members to protect that power. Rather than changing the balance of power between the branches, enhanced rescission authority would increase the accountability of both branches. By requiring that Congress vote on the President's proposals, enhanced rescission would give the President a meaningful alternative to either accepting wasteful spending or else vetoing an entire appropriations bill. At the same time, enhanced rescission would increase the ability of Congress to review individual spending programs tucked away in large appropriations bills. Their fate would be decided by the majorities in each House. In this way, programs that benefit special interests at the expense of the public interest would no longer escape proper scrutiny, and the congressional "power of the purse" would be fully respected.
CONCLUSION
From the very beginning of his Administration, the President supported the enactment of the line-item veto, and he worked with Congress to enact the Line Item Veto Act. With this new authority, the President canceled spending and tax provisions, totaling $2 billion, that served special interests at the expense of the public interest. The President was disappointed with the Supreme Court's decision striking down the line-item veto, and he is committed to continue to cut wasteful spending and maintain fiscal discipline. Granting the President enhanced rescission authority could make a difference in how government operates. It would be a useful tool for eliminating waste, for increasing accountability in the budget process, and for ensuring that public funds are put to the best possible uses. I'd be happy to answer any questions you may have.
