NCPA - National Center for Policy Analysis

25 Years Under The Budget Act

July 21, 1999

On July 12, 1974, President Richard M. Nixon signed the Congressional Budget and Impoundment Control Act of 1974. If Nixon had not been at the brink of impeachment over Watergate he surely would have vetoed this bill.

Its main purpose was to eliminate impoundment, which had been utilized by every president since George Washington. Impoundment gave the president a kind of line-item veto authority. If there was a provision of an appropriation bill he did not think was justified, he just didn't spend the money.

As the wage and price controls imposed in 1971 broke down and the OPEC oil embargo took effect in 1973, inflation skyrocketed. Nixon believed that reducing the federal budget deficit was critical to getting inflation under control. He relied heavily on impoundment, spurring Congress to try and outlaw the practice.

Republicans added budget reform language, establishing a new budget process, budget committees in the House and Senate, and the Congressional Budget Office. Many believed deficits had come about because Congress never dealt with total expenditures and revenues. If this could be done before the annual appropriations bills, it was thought, Congress would make better fiscal decisions, thereby eliminating the deficit.

In fact, the new budget process ratified deficits. And by requiring Congress to vote on a budget blueprint early in the year that explicitly acknowledged a deficit, the budget process actually removed the pain of voting for deficit-producing spending bills later in the year.

The deficit era appears to be over, and the budget process is now an impediment to intelligent budgeting. It imposes extraordinarily complex rules that take up incredible amounts of Congress's time without yielding any real benefits. Perhaps, therefore, it is time for the budget act to go.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, July 21, 1999.


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