All Commentary
Tuesday, September 1, 1987

A Line-Item Veto

The annual battle about the Federal budget provides an astounding spectacle that is both amusing and revealing. Despite countless committee meetings and lengthy heatings, the members of Congress fail to come to an agreement on revenues and expenditures. At the very close of the fiscal year, at midnight, September 30, the government is left without spending authority, causing its giant wheels to grind to a halt. But, lo and behold, a few hours after midnight, in a dramatic session, Congress approves a stopgap spending bill enabling government operations to continue. There is no agreement on any one of the 13 appropriations bills required to fund government; but there is unanimous agreement that government must continue; benefit checks must go out and Congressional pay checks must be issued. The members rise in support of a “continuing resolution” that authorizes the spending. Continuing resolutions thus take the place of the budget proper.

In 1986, Congress passed four separate stopgap resolutions to keep government from shutting down before it approved an omnibus resolution of $576 billion. The comprehensive spending legislation was necessary because none of the 13 appropriations bills that were drafted to fund the Federal departments and agencies had been enacted. Although it was the largest ever, the omnibus resolution did not include more than $400 billion for activities that are funded on a permanent basis, including Social Security, interest payments on the Federal debt, and the bulk of Medicare spending.

The budget process is a free-for-all between the President and numerous special interest groups represented in Congress. Early in February, the President releases his budget for the coming fiscal year, calling for certain outlays and revenues. Early in March, the President’s proposal is rejected for a number of reasons by the budget committees of both the House and the Senate. For all practical purposes, the rejection turns the budget process over to Congress whose members have difficulties reaching agreement on any of the appropriations bills. When no agreement can be reached, all proposals are combined into continuing resolutions, which in effect constitute the budget.

To the President and his administration the budget process is most frustrating; it prevents the attainment or fulfillment of administrative goals and purposes. They are forced to watch helplessly while members of Congress openly thwart the President’s efforts, blithely promoting their own political interests. The only retort at the disposal of the President is his power to veto the continuing resolution and thereby bring all government to a halt. No President has ever dared to resort to such drastic measures.

To deprive members of Congress of their partisan powers and “restore the balance of power,” some critics of Congress would grant more power to the President. They advocate a “line-item veto,” that is, Presidential power to veto spending for individual programs. Present budget procedures force the President to veto an entire appropriations bill containing hundreds of funding items, provided it passes both houses and reaches his desk, or veto the continuing resolution containing thousands of items, if he wants to block one particular program.

Several Presidents have repeatedly requested the veto authority and included appeals for enactment in their State of the Union messages. Their followers in Congress have introduced bills that would grant such powers. Some would provide a limited line-item veto authority that would permit the President to veto each of the 13 appropriations bills when they are combined into one continuing resolution.

No Balance of Power

The Presidential frustrations undoubtedly are matched by Congressional frustrations about the President seeking to prevent the attainment of Congressional goals and purposes. Both sets of frustrations spring from the fact that the sum total of goals and purposes exceed by far the available means, and from the circumstance that government in the United States is decentralized and its components frequently work at cross-purposes to each other. Federal fiscal activity may be frustrated in part by state and local government fiscal action, or vice versa, and Presidential activity may be frustrated by Congressional action, or vice versa.

Decentralization of government engenders a number of difficult tasks, especially if government is to engage in redistribution functions and provide particular economic services. Political society not only must decide which goods and services government shall provide, but also must determine which level and branch of government shall provide them. The decisions may be influenced by several considerations such as comparative economic efficiencies and political balance of power. In the United States, the desire for individual freedom also plays an important role in determining the division of governmental functions.

Before the dawn of massive government intervention in economic life, more than half a century ago, the situation was much simpler. Federal revenue exceeded expenditures during most fiscal years, which created few occasions for fiscal conflict and frustration. Combined state and local fiscal activity generally exceeded Federal taxing and spending, which made the federal government a relatively unimportant component of government in general.

The Founding Fathers had planned it that way. There was fear in their minds regarding excessive power at the executive level of the federal government. Therefore, they gave the power of budgeting as well as that of legislating to Congress, although it was not well qualified to perform the budgetary function. They granted the President some control over the budget through the right to veto, which the Congress may override by a two-thirds vote. In short, the Founding Fathers made the President execute the budget passed by Congress; they did not even call on him to help formulate the budget. They envisioned no “balance of power.”

The President first appeared on the scene of budget-making in 1921, when Congress passed the Budget and Accounting Act. It assigned the task of budget preparation to the President and created the Bureau of the Budget to assist him. Although the act has been amended a number of times, it continues to provide the basic budget procedure in effect today.

The budget-making process has been frustrating ever since. The President is convinced that his election to high office by popular vote gives him a mandate for policy-making. Numerous pressure groups are calling for more government services and favors, which he is quick to promise, just like his fellow politicians running for office. As President he is judged by his ability to make good on his promises and commitments although he has no such executive powers. He is unable to deliver favors and benefits unless he manages to persuade Congress to appropriate the necessary funds. His popular mandate may easily run aground because of Congressional refusal to finance his promises and commitments. Where he would want to increase expenditures, the Congress may allocate less, and where he would spend less, the Congress may appropriate more. Thus Congress may tie the President’s hands and force him to conduct policies he does not wish to conduct. In his view, Congress is denying his mandate and usurping his power.

Conflict on Every Level

The tensions and frustrations in both branches of government are symptomatic of the general conflict that springs from the transfer and entitlement function of government. After all, government has no sources of revenue other than that which it forcibly exacts from its citizenry. Both the exaction and the distribution create economic, social, and political conflict not only between beneficiaries and victims, but also between the beneficiaries themselves who are likely to argue about the mode of distribution, and between the victims contesting their assigned shares of the burden. The benefit and entitlement state is a conflict state on every level of its power structure.

In the noise of the entitlement battle it is difficult to judge the priority of the claims. Both the Presidential and the Congressional pressures for transfer funds spring from the same entitlement ideology that makes politicians and officials the arbiters of economic well-being. Both stand on shaky moral ground; both choose might over right. Moreover, no matter how their claims be judged on moral grounds, they also need to be measured in terms of costs and consequences.

In nearly every case the President’s commitments to exact and transfer income exceed by far the spending schemes of the members of Congress. Where individual Congressmen may engage in porkbarreling and logrolling, spending millions of dollars, the president usually spends many billions on “national needs” and “emergencies.” His interests are nationwide; a Congressman’s concern is likely to be special and parochial. The great spending programs of our time, costing hundreds of billions, from Social Security to Medicare and Medicaid, are the handiwork of Presidents; the members of Congress fall in with the President and lend their votes to his ambitious undertaking.

While the President may be lobbying Congress for new Medicare benefits costing billions of dollars this year and every year thereafter, a member of Congress may hold out for a subsidy to a metropolitan transit system. The administration may want to phase it out; but members of Congress representing various districts receiving subsidies do not sanction the phase-out. They simply allocate the funds and mandate that they be spent. Or the Federal Aviation Administration may want to close an airport tower; Congressmen may mandate that it remain open. The administration may want to move an office, agency or base; Congress may order that it not be moved. Congress may even require the federal government to build facilities which the administration does not want. To serve the interests of constituents, many members of Congress are voting their special interests without concern for the consequences of any individual program on the budget as a whole. Many are voting their interests without much concern for the objections of the President.

A Shift of Power

They are opponents of the line-item veto, arguing forcefully that the veto power would have very limited effects on Federal spending, but dramatically shift power to the President. Many consider it “one of the most dangerous proposals ever made to the Congress.” Some even call it a “dictatorial power.”

Nearly one-half of Federal spending is not funded by appropriations bills. Entitlement pro grams, such as Social Security and other fixed obligations of the federal government, need no further Congressional approval and, therefore, would not be subject to an item veto. In contrast, defense expenditures making up more than one-half of the money appropriated would be subjected to the veto. Aside from entitlements and defense spending, only 11 to 14 percent of the Federal budget would be exposed to the veto power, and only a small fraction thereof would invite an actual veto. Careful analysis probably would reveal that only one per cent or less of Federal spending would be vetoed if the President were given the veto power. It would not in the least alter the pattern of government spending nor call a halt to Congressional porkbarreling and logrolling or alleviate the problem of deficit spending. It is a mere palliative capable of drawing our attention from the real deficit dilemma.

Although the item veto may be no antidote to deficit spending, it surely would create more Presidential power and alter the structure of government. It would be a powerful instrument of reward and punishment in the hands of the President. To reward members of Congress for supporting Presidential programs the item veto would be held in abeyance. Loyal followers may even be encouraged to engage in porkbarreling and logrolling and to proceed assuredly without the risk of an item veto. The President’s opponents, members of the opposition party, or lonely resisters to Presidential programs, however, may face the item veto in all their special programs. The veto power may single them out and hold their projects hostage. In the hands of a president with dictatorial inclinations, the item veto may become a powerful instrument.

Congress, of course, may at any time override the line-item veto. In reality, however, the power is nonexistent as long as the President maintains a loyal entourage of at least one-third of the members of the House or Senate. This does not prove difficult with politicians whose votes are guided primarily by considerations of economic largesse.

To its ardent sponsors the line-item veto is a potent remedy that promises to cure a great many evils. It may fairly and amicably divide the functions of the various branches of government, restore the balance of power, check the lust of spending, and hopefully balance the budget.

Unfortunately, there are no ready cure-alls for political ailments. The line-item veto power is no panacea. It cannot break the habit of deficit spending. Neither law nor regulation, neither Congress nor the President can balance the budget if the people are enamored with political bounty. Reforms will prove unavailing if they are not accompanied by changes in political morality. They must originate with the people, eager to do what they should do, and determined to do it because it is right.

  • Hans F. Sennholz (1922-2007) was Ludwig von Mises' first PhD student in the United States. He taught economics at Grove City College, 1956–1992, having been hired as department chair upon arrival. After he retired, he became president of the Foundation for Economic Education, 1992–1997.