Control Over the Federal Budget
As an institution, the federal budget has undergone a dramatic transformation over the past two centuries. Historically, the transformation may be broken down into three distinct periods: legislative dominance (1789–1921), presidential dominance (1921–1974), and legislative-executive conflict (1974–present).
Legislative Dominance (1789–1921)
The Constitution gives Congress the power to raise funds (tax) and appropriate (spend money). The framers believed that the enormous power of taxing and spending was best left to the Congress, because it was feared that the president could abuse the power to serve his own ends, and perhaps even overthrow the government. The theory was that Congress could check the power of the presidency by controlling the resources at his disposal.
Passing the budget is one of the few mandatory functions of Congress and the president. It must be done every year, or the government will cease to operate. Perhaps more than any single document, the budget is a reflection of the president's priorities, agenda, and direction for the country.
The Constitution is vague about how the budget process should work. Chapter 2 explained that Article 1, section 8 of the Constitution provides only four general guidelines for federal spending:
All money drawn from the treasury must result from an appropriations bill.
Congress must account for all expenditures from “time to time.”
Appropriations that support the military expire after two years.
All expenditures must be made for the “general welfare” of the United States.
As required by the Constitution, all spending bills originated in the House of Representatives and were sent to the Senate once the House had completed its work. (Today they may be introduced simultaneously in both chambers.) All appropriations were made in one single bill, and the goal was to achieve a balanced budget — even though the Constitution doesn't require it.
In fact, between 1789 and 1921, a balanced budget or surplus was achieved two-thirds of the time. The only time federal spending surged was during times of war — quadrupling during the War of 1812, doubling during the Mexican War, and increasing twenty-fold during the Civil War. Public debt was paid off quickly, however, as lawmakers and the public viewed deficit spending as a moral shortcoming.
The Constitution is purposefully vague about the budgetary process because at the time of the Constitutional Convention, the practice of budgeting had not been established yet. The budget process was conceived in Europe during the nineteenth century, and wasn't duplicated in the United States until the early twentieth century.
Following the Civil War, Congress took a first step toward creating a budget system when it established appropriations committees in both the House and Senate to handle all spending matters.
Prior to that, there was no committee in charge of spending; the entire chamber worked on appropriations, which was a cumbersome and messy process. At this point in time, the president played virtually no role in determining federal spending, except to sign or veto appropriations legislation. Congress dominated the process.
Presidential Dominance (1921–1974)
Following World War I, Congress conceded that it was no longer capable of controlling spending, as federal expenditures skyrocketed from $725 million in 1915 to $19 billion in 1920 (and the public debt soared from $1 billion to $26 billion). In response to heightened public scrutiny, Congress passed the Budget and Accounting Act of 1921, which created a presidential budgeting process that still exists today.
The act gave the president a formal role in the process, requiring him to submit an annual budget to Congress. It also barred federal agencies from making appropriations requests directly to Congress, which they had done in the past, and established the Bureau of Budget (renamed the Office of Management and Budget in 1970) to help the president set his budget.
When was the last year that annual federal spending decreased?
In 1954, the federal government spent $70 billion, which was $6 billion less than the previous year. President Eisenhower was a firm believer in fiscal austerity and responsibility. During his eight years in office, federal spending grew at its slowest rate during the twentieth century.
Beginning with Franklin Roosevelt, presidents began to use their newfound budgeting powers to shape public policy and dominate the national agenda. Rather than control federal spending, the Budget Act of 1921 spurred an explosion in the growth of government, as presidents linked ambitious legislative programs like the New Deal and the Great Society to their annual budgets.
During this time, Congress played a secondary role in the budgeting process; while it still appropriated federal spending, it increasingly deferred to the president's proposals and estimates.
Legislative-Executive Conflict (1974–Present)
Throughout the 1960s, budget tension between the president and Congress mounted, as lawmakers grew increasingly disenchanted with the direction and cost of the Vietnam War. Hostility between the two branches reached a boiling point in the early 1970s, when President Nixon refused to spend billions of dollars appropriated by Congress.
In response to this, Congress passed the Congressional Budget and Impoundment Control Act of 1974, which President Nixon signed into law just a month before resigning from office. The act called for Congress to adopt its own budget resolution, as well as set revenue and spending goals.
In January of 1995, following their takeover of Congress for the first time in four decades, the Republicans tried to cut taxes and control spending. President Clinton responded by twice vetoing the Republican budget, and in the process temporarily shut down the government. With public pressure mounting, it was the Republicans who capitulated as President Clinton's approval ratings soared during the shutdown.
It also established the Congressional Budget Office (CBO), which provided Congress with its own economic assumptions, program analysis, and budget recommendations. With the CBO, Congress no longer had to rely on the president's estimates and recommendations. This was an important development in the legislative-executive budget relationship.
Thanks to the passage of the 1974 act, Congress and the president have an equal role in the budget process. However, because of that equality, the process has become acrimonious, partisan, and excruciatingly deliberate. Over the last two decades, some of the most contentious political fights have been over budgetary matters, including President George H. W. Bush's reneging on his “no new taxes” pledge, and the 1995 government shutdown.
