The Constitution and the federal budget process

The state of the federal budget will be a hot topic of discussion as the new Trump administration and a Republican-controlled Congress set spending priorities in a contentious Washington environment. Here's a brief look at the constitutional roots of this process.

In a general sense, the Constitution tasks Congress and more specifically, the House of Representatives with “the power of the purse.” At the Constitutional Convention in Philadelphia in 1787, the subjects of federal spending and taxes were debated in earnest. Massachusetts delegate Elbridge Gerry argued that that the House of Representatives “was more immediately the representatives of the people, and it was a maxim that the people ought to hold the purse-strings.”

The Constitution that resulted, however, contained broad provisions that established that all of Congress would ultimately play a part in the federal budget, including spending and taxes. Article 1, Section 9, Clause 7 contains two clauses: The Appropriations Clause and the Statement and Accounts Clause: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”

In the National Constitution Center’s Interactive Constitution, Kate Stith from the Yale Law School explains why the federal budget is part of the “job description” of Congress: “Like the appropriations requirement, this [Statement and Accounts] requirement states not a power but a legislative duty that has been interpreted to require an annual budget.”

Stith also points to how Justice Joseph Story defined the relationship between the two clauses in his Commentaries on the Constitution. “The power to control and direct the appropriations constitutes a most useful and salutary check upon profusion and extravagance, as well as upon corrupt influence and public speculation,” Story said. “[A]nd to make their responsibility complete and perfect, a regular account of the receipts and expenditures is required to be published, that the people may know, what money is expended, for what purposes, and by what authority.”

In our nation’s early years, Congress controlled the budget process. According to historical data produced by the Office of Management and Budget, the federal budget was in a state of surplus until 1850. For the next 50 years, there was a national deficit related to costs incurred by the Civil War and Spanish-American War, and the 1890s recession. Then, until the World War I era, the budget was mostly balanced, but debt related to the war and the addition of the national income tax as a budget source made the budgeting process more problematic.

In its official history, the House notes that changes in how budget matters were considered led to complications after the Civil War.  “The Appropriations Committee was established to fund programs, while Ways and Means retained jurisdiction on tax policy. House leadership and other committees also tried to influence the appropriations process, and the lack of coordination over the years led to high deficits and the implementation of the federal income tax in 1913,” it says.

In 1921, the Budget and Accounting Act moved many of the preliminary budget-setting functions to the President and the Executive Branch. The act established the Bureau of the Budget (now the Office of Management and Budget) as an Executive Branch agency that works with the President on drafting a budget; it also established the General Accounting Office (now the Government Accounting Office) as an auditor reporting to Congress.

Most importantly, the 1921 Act required the President to submit a proposed annual budget for the federal government to Congress, which added to the considerable power allocated to the Executive Branch.

In 1974, Congress confronted some of these growing presidential budgetary powers when it passed the Congressional Budget and Impoundment Control Act, over a veto issued by President Richard Nixon. Nixon had refused to spend money allocated by Congress, citing inflation fears, using an executive power called impoundment. And as a presidential candidate in 1972, Nixon also demanded that the President be allowed by Congress to cut federal spending as needed, to control deficits.

Congress re-established some of its budgetary powers by creating the Congressional Budget Office to gather its own budget-research information and by adding standing committees in the House and Senate to handle budget matters. It also greatly curtailed the President’s budget impoundment powers, which some saw as a de facto veto of congressional actions. The 1974 act also put in place important procedural measures that allowed Congress to better coordinate the budget process.

So today, the Congress and the President share budget responsibilities, under a very general mandate from the Constitution. The President proposes annual budget guidelines. The proposed budget from the President is considered and amended in many cases by House and Senate committees. At some point, a group of House and Senate members meets to work out differences between these appropriations bills. And then the President signs the individual bills, or the one bill that includes the entire budget. If not all the bills are signed by October 1, Congress can pass a continuing resolution until all the bills are passed. But in some cases, a deadlock can lead to a government shutdown if continuing resolutions aren’t passed by that deadline.