Lessons from 1974
Budgetary matters.


In the years, prior to the passage of the Congressional Budget and Impoundment Act of 1974, the entire budget process was considerably more decentralized. There were no annual budget caps or spending targets. During the course of the year, the president would sign bills reported out of the Appropriations Committee and annual federal spending was the sum total of these appropriations plus entitlements.

Despite the lack of budgetary targets, spending was kept in check and appropriations bills were typically passed in a timely manner. This is largely because the membership of both the House and Senate Appropriations Committees was considerably more conservative than it is now. In fact, the leadership of the House of Representatives would typically select conservatives and members in safe districts for the Appropriations Committee. Not surprisingly, these members were less inclined to support wasteful pork projects.

However, starting in the mid 1960s, a budget process that was marked by consensus and collegiality started to unravel. New entitlement programs and the Vietnam War caused expenditures to surge, resulting in persistent deficits. Furthermore, the controversial nature of the Vietnam War and many Great Society programs led to more infighting over the budget. Lastly, President Nixon’s willingness to impound appropriated funds outraged many congressmen. As such, the combination of persistent deficits, infighting, and impoundment generated interest in budgetary reform and led to the passage of the Congressional Budget and Impoundment Act of 1974.

The Congressional Budget and Impoundment Act of 1974 prevented the presidential impoundment of appropriated funds and tried to prevent budget deficits by better coordinating and centralizing the budgetary process. The 1974 Act created new Budget Committees in both the House and Senate. It required that both the House and Senate each pass a budgetary resolution by May 15 (now April 15) which would set targets for revenues and expenditures for both committees and Congress as a whole. These resolutions were officially non-binding, but could be enforced through a subsequent reconciliation process.

These reforms at first seemed to have some promise. For the first time a comprehensive budget process was created where Congress would have to think about totals, choose a relationship between spending and revenue, and try to bring the two together. Furthermore, entitlement spending would be confronted when considering the totals. New entitlement spending would be analyzed by the newly formed Congressional Budget Office and receive greater scrutiny than it had before.

Unfortunately, almost everyone agrees that the Congressional Budget and Impoundment Act of 1974 was less successful that its advocates hoped. This was largely because the House and Senate Budget Committees were largely unable or unwilling to enforce budgetary ceilings on other Congressional Committees. Furthermore, spreading power between the Budget Committees and the Appropriations Committees made it more difficult to coordinate efforts to cut spending.

Still, other factors besides the Congressional Budget and Impoundment Act of 1974 are largely responsible for the increases in spending since the mid 1970s.  For instance, during the 1974 elections Democrats gained over 40 seats in the House and ideological liberals obtained more power with in the Democratic Party. This resulted in a considerably more liberal House Appropriations Committee, which ceased being an effective safeguard of the federal treasury. Furthermore, since the 1970s, entitlement spending has consumed a progressively larger share of the budget, making budget cuts more difficult politically.

Even though the 1974 Budgetary Reform Act, was unable to effectively rein in federal spending, it can still teach conservatives some valuable lessons. Most importantly, Congress is not good at constraining its own ability to tax and spend. The most effective fiscal limits are those that are able to place outside pressure on legislatures. For instance, the rebate provisions in Colorado’s Taxpayer’s Bill of Rights (TABOR) forced the Colorado legislature to abide by the expenditure limit. Furthermore, Rep. Paul Ryan’s proposed line-item veto is appealing because the president can serve as an effective check on Congress. Overall, while congressional efforts to limit itself through process changes, sunset provisions, and budget caps may do some short-term good, past experience indicates that such proposals may disappoint in the long run.

 – Michael J. New is an adjunct scholar at the Cato Institute, a summer fellow at the Heritage Foundation, and an assistant professor at the University of Alabama.


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