CBO

TESTIMONY

Statement of

Donald B. Marron

Acting Director

CBO’s Comments on H.R. 4890,

the Legislative Line Item Veto Act of 2006

before the

Subcommittee on the Legislative and Budget Process

Committee on Rules

U.S. House of Representatives

March 15, 2006

This document is embargoed until it is delivered at 10:00

a.m. (EST), Wednesday, March 15, 2006. The contents

may not be published, transmitted, or otherwise

communicated by any print, broadcast, or electronic

media before that time.

CONGRESSIONAL BUDGET OFFICE

SECOND AND D STREETS, S.W.

WASHINGTON, D.C. 20515

Mr. Chairman, Mr. Hastings, and Members of the Subcommittee, I am pleased to

appear before you today to discuss H.R. 4890, the proposed Legislative Line Item

Veto Act of 2006, which would provide for expedited legislative consideration of

certain Presidential proposals to rescind budget authority and targeted tax

benefits.

In my testimony this morning, I offer the following thoughts:

 The current process of rescissions (cancellations of budget authority) has

generally had very little net impact on the overall budget.

 H.R. 4890 would address some of the reasons that the current process is

believed to be limited in its ability to reduce deficits.

 In analyzing such legislation, it is important to distinguish between the visible,

direct effects it may have (the rescissions that are proposed and enacted) and

the subtle, indirect effects it may have on the legislative process and fiscal

policies.

 It is difficult to predict how H.R. 4890 would affect the legislative process

and, consequently, whether the changes proposed in the bill would actually

improve fiscal discipline or would simply shift spending priorities to those

favored by the President.

The Current Rescission Process

Following increasingly frequent conflicts between Presidents and the Congress

over funding priorities, which peaked during the Nixon Administration, the

legislative branch reasserted its constitutional control over the power of the purse

with enactment of the Congressional Budget and Impoundment Control Act of

1974. That law instituted a formal process, centered on a concurrent resolution of

the budget, through which the Congress could develop, coordinate, and enforce its

own budgetary priorities independently of the President. The budget law created

legislative institutions to implement the new Congressional budget process: the

House and Senate Budget Committees to oversee execution of the budget process

and the Congressional Budget Office (CBO) to provide the budget committees

and the Congress with an independent, nonpartisan source of budgetary and

economic information. As a check on unilateral action by the President to

impound or cancel appropriated funding, the law established a new rescission

process for controlling Presidential impoundments of funds.

Under the provisions of the 1974 law, the President can propose to rescind

spending authority previously enacted into law. The Congress has 45 days of

continuous session to approve the President’s requests, but it does not have to act

on the proposals. During the 45-day period, the President can withhold the funds
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Table 1.

Rescissions of Budget Authority, Fiscal Years 1976 to 2005

(Billions of dollars)

1976-

1980

1981-

1985

1986-

1990

1991-

1995

1996-

2000

2001-

2005

Total,

1976-

2005

Rescissions Proposed by

the Presidenta

Dollar amount 9.3 27.3 16.7 17.5 2.0 0 72.8

Dollar amount enacted

by the Congress 3.0 15.5 0.2 4.7 1.3 0 24.6

Percentage enacted 32 57 1 27 63 n.a. 34

Rescissions Initiated by the

Congress (Dollar amount) 3.5 11.7 24.3 47.4 25.4 29.8 142.1

Total Dollar Amount

of Rescissions 6.5 27.2 24.5 52.1 26.7 29.8 166.7

Congressionally Initiated

Rescissions as a Percentage

of Total Rescissions 54 43 99 91 95 100. 85

Memorandum:

Total Discretionary

Budget Authority 1,291.8 1,965.1 2,304.7 2,614.5 2,708.0 4,140.6 15,024.6

Total Rescissions as a

Percentage of Discretionary

Budget Authority 0.5 1.4 1.1 2.0 1.0 0.7 1.1

Source: Congressional Budget Office based on data from the Government Accountability Office and the

Office of Management and Budget.

Note: n.a. = not applicable.

a. “Rescissions proposed by the President” include proposals submitted under 1974 Act procedures and do not

include other proposed budget authority cancellations.

proposed for rescission. But once that period has expired, the funds must be made

available for obligation.

Presidents have made very little use of the authority to recommend rescissions.

From 1976 through 2005, Presidents proposed about $73 billion in rescissions,

about one-half of 1 percent of the more than $15 trillion in total discretionary

budget authority legislated in those years (see Table 1). Moreover, in dollar terms,

the Congress enacted only about one-third of the proposed rescissions. At the

same time, the Congress initiated considerably more rescissions (that were

ultimately signed into law by the President) than those proposed by the Executive.

President Clinton operated under the Line Item Veto Act of 1996, effective on

January 1, 1997, until it was declared unconstitutional by the Supreme Court in
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June 1998. That statute had authorized the President to cancel discretionary

appropriations, any new item of direct spending, and certain limited tax benefits.

In order to overturn such a veto, the Congress would have to pass a resolution of

disapproval within 30 days. The President could veto that resolution and force an

override vote in each House. President Clinton’s 82 cancellations would have

saved about $355 million in 1998 and just under $1 billion for 1998-2002. Total

five-year savings from cancellations that were not overturned (by the Congress or

the courts) were less than $600 million. By comparison, total spending and

revenues in 1998 were both about $1.7 trillion. The experience under President

Clinton may not indicate how the line-item veto might have been used in other

situations by other Presidents. Nevertheless, President Clinton’s use of the 1996

line-item veto statute is consistent with how little the 1974 law’s rescission

system has been used.

There are a number of reasons for the limited budgetary impact of the current

process. First, under current law the Congress need not act on the President’s

rescission proposals. Members never have to go on record in favor of or against

items that the President has identified as unnecessary or wasteful. Proponents

believe that strengthening the President’s role in the rescission process could

serve as a deterrent to lawmakers’ inserting into broader legislation provisions of

little benefit to the general public interest. A more effective rescission process,

proponents contend, would make it easier for the President to eliminate “porkbarrel” provisions that benefit narrow constituencies.

Second, the 1974 law applies to a limited portion of the budget. Presidents may

propose to rescind only discretionary spending, which currently makes up just 38

percent of federal spending⎯a share that may decline even further if mandatory

spending continues its rapid growth.

Third, under current practice, rescissions seem to have been used primarily to pay

for other spending, rather than to reduce spending overall.

Fourth, and perhaps related to the third reason, rescissions often appear to be

focused on spending items for which outlays would be significantly less than

budget authority⎯at least in the first years and possibly altogether. Such budget

authority could be most easily used to offset additional spending without

compromising existing programs.

In assessing the impact of rescissions enacted from 2000 to 2005, CBO estimates

that about half of the amounts rescinded would result in no outlay savings. The

bulk of such rescissions applied to the Department of Housing and Urban

Development’s Housing Certificate Fund, which accounted for about one-third of

all rescissions during that period. Those rescissions of housing funds generally

canceled excess budget authority from one of two sources: funds that had

originally been provided to finance vouchers for the tenant-based program but had

not been used and funds that had been obligated for long-term contracts for
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project-based units but ultimately were not needed to pay for those contracts. Just

how much of those funds would have been spent in subsequent years had they not

been rescinded is unclear. (Congressionally initiated across-the-board reductions

in discretionary spending enacted in six out of the past seven years are examples

of rescissions under current law that have clearly reduced outlays.)

Proposals for Change

Persistent deficits and rapid growth in federal spending in the 1980s, most of the

1990s, and now in the 2000s have generated interest in changing the rescission

process to enhance fiscal discipline and improve accountability.

Generally, proposals to reform the rescission process would shift authority back to

the executive branch by enhancing the President’s power to cancel budget

authority. Every President for the past 25 years has advocated some form of lineitem veto. President Reagan advocated such a veto, which he had used while

Governor of California. The President George H.W. Bush called for expanded

rescission authority. President Clinton advocated a line-item veto as a candidate

for President and after his election operated under the Line Item Veto Act of 1996

until it was held to be unconstitutional. President George W. Bush advocated a

line-item veto as a candidate and has continued to do so in several of his budget

submissions, including the one for fiscal year 2007.

Reform proposals have taken several forms:

 A constitutional amendment to allow the President to veto portions of bills

presented for his or her signature.

 Separate enrollment of funding provisions as discrete “bills” once a larger bill

is passed by the Congress. Each provision would be presented separately to

the President for signature, allowing the President to veto some “bills”

according to constitutional procedures while signing the rest.

 Enhanced rescission, which would allow the President to continue to withhold

funds unless the Congress acted to overturn the rescission proposals. That was

the approach adopted in the Legislative Item Veto Act of 1996 and later found

unconstitutional.

 Expedited rescission, which would establish “fast-track” procedures to help

ensure that the President’s proposed cancellations received an up-or-down

vote by the Congress within a specified period of time. Expedited rescission

would not shift as much power to the executive branch as other approaches

described above. Although the President would not have unilateral authority

to cancel provisions of law, Presidential proposals could not be ignored by the

Congress. This is the approach of H.R. 4890.
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However, most of these proposals for strengthening the rescission process,

including H.R. 4890, would be unlikely to have a significant effect on overall

spending.

H.R. 4890, the Legislative Line Item Veto Act of 2006

H.R. 4890 includes provisions to address many aspects of the current system that

are thought to limit its effectiveness for deficit reduction, including:

 Provisions intended to prevent rescinded funds from being used to offset

additional spending. The legislation would require that, after enactment of a

rescission bill, the budget committees adjust committee allocations in the

budget resolution to reflect the rescissions and the appropriations committees

revise allocations to subcommittees.

 Explicit authority for the President to propose rescission of new authority for

mandatory spending and targeted tax benefits in addition to discretionary

budget authority.

 Expansion of the definition of budget authority that may be proposed for

rescission to include matters generally referred to as earmarks in legislative

language and committee reports––thus addressing concerns about “porkbarrel” spending.

 Fast-track procedures that would require the Congress to vote expeditiously

on rescissions proposed by the President.

In addition, the bill would authorize the President to defer for up to 180 calendar

days the obligation of any discretionary budget authority that he proposed to be

rescinded. Similarly, the President could defer for up to 180 days execution of any

direct spending proposed for rescission. Those deferrals would not end upon the

Congress’s rejection of the rescission proposals. In contrast, under current

authority, the President may withhold from obligation funds proposed for

rescission for only 45 days (or until the Congress approves a rescission bill if that

occurs sooner).

To the extent that the Legislative Line Item Veto Act would shift power from the

Congress to the President, it might change behavior in subtle ways that are

difficult to observe. For example, the fast-track process for Congressional

consideration of rescission proposals would decrease Congressional leaders’

control over the legislative process by forcing the President’s requests to the top

of the list of matters for consideration.

The threat of the President’s authority to propose rescission of earmarks could

restrain the Congress from including some provisions that it might otherwise have

incorporated. Conversely, the Congress might accommodate some of the
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President’s priorities in exchange for a pledge not to propose rescission of certain

provisions, thereby increasing total spending. As CBO has previously testified,

studies of the line-item veto at the state level have documented similar devices

employed by state legislatures over the years to limit the budgetary impact of

governors’ item-veto authority. Additionally, Members might find it difficult to

obtain support for a bill by including items favored by other Members but

opposed by the President, who might propose rescinding them. The President’s

power to unilaterally defer spending for six months, thereby effectively canceling

some budget authority and some programs altogether (for which the funding

would lapse at the end of the fiscal year), would be a powerful tool to negotiate

passage of the Administration’s spending priorities.

Moreover, the President’s inclination to exercise his authority to propose

rescissions and to defer obligation and spending may depend on a host of political

factors, including whether he and the Congressional majorities are of the same or

opposing political parties.

Finally, although H.R. 4890 includes the authority to propose rescissions of new

mandatory spending, it would not apply to existing mandatory programs. Those

programs now constitute the majority of the federal budget, and are likely to pose

significant fiscal challenges in coming years.

Conclusion

Additional budgetary tools can assist in bringing about budgetary restraint, and

improved accountability is desirable, whether the budget is in surplus or deficit

and whether the amounts involved are large or small. Such tools, however, cannot

establish fiscal discipline unless there is a political consensus to do so. Competing

priorities can make such consensus difficult to reach. In the absence of that

consensus, the proposed changes to the rescission process included in H.R. 4890

are unlikely to greatly affect the budget’s bottom line.

Moreover, in contemplating the bill, the Congress will have to weigh the potential

for possibly modest budgetary benefits against possible drawbacks, which include

a shift of power to the executive branch and effects on the legislative process.