343 April 3, 1984 LINE -ITEM VETO T RIMMING. THE PORK INTRODUCTION Congress begins consideration of President Reagan's call for a line-item veto April 10th with hearings before the Senate Judiciary Committee. The proposal could come to the Senate floor by late April, when an increase in the debt ceiling is debated. The controversial initiative to strengthen presidential control over appropriations recently has earned surprising, if tentative respect-largely because Congress seems unable to control the budget process it created ten years ag0. l The problem is that under current law the President is faced with only two unpleasant options when unacceptably large appropria tions bills, such as last November's 316 billion continuing resolution, land on his desk. He can Ilrubber stamp'l the bills in I their entirety, replete with billions of dollars of special interest spending vetoing the bill No middle ground is available. A line-item I veto would permit the President to "blue pencil" individual items I from congressional appropriations, so that po r k-barrel or special interest spending is not approved merely by Ifriding the coat-tails1 of essential appropriations Or he can shut down government operations by There is nothing new about the line-item veto. state governors have the power, and the veto h a s been requested by virtually every President since the Civil War give the President line-item veto power have been put before Congress--and failed seriously by Congress as a budget control device until today Forty-three Many bills to The line-item veto h a s not been considered See John Palffy Giving the Budget Process Teeth," Heritage Foundation Backgrounder No. 305, November 11, 1983. Opinions are divided, ho on the merit and legality of the proposal. Opponents claim that the line-item veto would be uncon s titutional, and that it would grant the President undue power over spending priorities--without significantly reducing the deficit. Proponents respond that it would be constitutional that safeguards could be added to control White House power, and that th e cumulative impact on spending could be considerable. If Presidents during the last ten years had used line-item veto to cut just 1 percent from yearly spending, the EY 1985 defict could be half its projected level 2 eve Many practical concerns and consti t utional objections need to be answered before the line-item veto is enacted. Despite such problems, however, greater control of federal spending is a legitimate responsibility of the President. And more effective executive control of spending is needed to counter the current institutional incentives for Congress to spend taxpayers' money so freely. The line-item veto, therefore, deserves very serious consideration WHY ACTION IS NEEDED Because, under current law, the President must approve or disapprove ent i re appropriations bills, Congress is able to pass special interest and non-germane lfridersI' by incorporating them into major last-minute funding bills and resolutions. If the, President refuses to sign such "Christmas tree" bills, he often must shut-dow n the government agencies covered by the legislation.

The President can, of course, petition Congress to cancel any spending plans, but unless both Houses of Congress approve the rescission by a two-thirds vote within 45 days, the President must spend the funds. Since the Budget Control Act went into force in 1975, 41 percent of all such presidential rescission requests have been ignored by Congress. None of President Reagan's 1983 rescissions were approved.

A line-item veto would strengthen the President's rescission powers. The President would be able to rescind individual appro priations and allow the rest of the bill to pass. This rescission would stand unless Congress explicitly overrode the veto.

Senator Mack Mattingly (R-GA) has proposed two methods to convey the line-item veto power to the President-a constitutional amendment (S.J. Res. 178) and a legislative rule (S. 1921). The amendment would involve the lengthy amending process, requiring approval by 34 states aft er passage through both Houses of Congress.

S. 1921 would grant the President statutory power for the line item veto. In theory at least, this could became law in time to give the President linewitem veto power for the N 1985 budget.

But this could face s erious constitutional challenges and, of course, it would be subject to repeal at any time. 3 A modification of the line-item veto proposal, offered last November by Senators William Armstrong (R-CO) and Russell bong D-LA failed in the Senate by only thre e votes. Armstrong has promised to present it for a vote again this spring, when Congress debates the debt ceiling. A similar proposal (H.R 5000) has been introduced in the House by Minority Leader Robert Michel R-Ill.) Under the Long-Armstrong proposal, t h e President would be required to defer or rescind spending whenever the federal debt exceeds quarterly limits imposed by Congress. This power would be limited, however. He could not eliminate an entire program or project, or reduce any program by more tha n 20 percent. Nor could he restrict payments to individuals Because the President would still have to accept or reject entire appropriation bills under the Long-Armstrong proposal, and because there would be precise limits on the occasions when the Preside n t could employ it, the amendment technically is not a line-item veto. Rather, it strengthens existing rescission powers. Senator Pete Domenici (R-"M) has noted,2 however, that tying the line-item veto to the debt ceiling may not be very effective; Congres s , for instance, could simply raise the ceiling to prevent presidential action THE CASE FOR A LINE-ITEM VETO Deficit Reductions The fiscal effects of the line-item veto would be limited because 55 percent of federal spending (interest payments and most ent i tlements are permanently authorized, not !'appropriated, I' and thus are not subject to presidential review. Moreover, a President cannot veto appropriations committed from previous years=-and these appropriations make up approximately 20 percent of each f iscal year's spending. So less than 30 percent of federal spending (or $260 billion in the proposed FY 1985 budget) would be subject to line-item veto. The House Budget Conunittee in a recent analysis, has argued that even 30 percent might prove an ~ver-e s timate By assuming that President Reagan would not veto any defense spending, the Committee concluded that less than 90 billion would actually be subject to a Reagan line-item veto in F'Y 1985 The House Budget Committee analysis is subject to at least two criticisms, however. It is not clear, for instance, that de- fense spending would be exempt from a Reagan line-item veto. The Administration knows well that the defense budget is not immune from pork-barrel spending--Pentagon and White House officials hav e Congressional Record, November 16, 1983, p. S16331.

The Line-Item Veto: An Appraisal, Committee on the Budget, U.S. House of Representatives January 1984. 4 tried for years to close a number of unneeded military installa tions, for example, only to be ig nored by Congress. And, while President Reagan might focus the line-item veto on the non-defense side of the budget, the converse would likely be assumed the case during a Democratic administration As previously enacted multi- year obligations expire, ove r 40 percent of the federal budget would become at some time or other subject to the line-item veto.

American Enterprise Institute budget analyst Norman Ornstein contends that a President would use the line-item veto to cut only 1 percent a year from the b udget. State governors typically veto 1 to 3 percent on spending requests per year. While a 1 percent cut in the M 1985 budget would amount to only $9.2 billion-a tiny fraction of the projected $200 billion deficit the compounding effects of cutting 1 per cent from the budget every year soon would become significant.

Table 1 illustrates such cumulative effects. The table indicates what federal spending might have been in past years if the President had used a line-item veto to make very modest cuts in the b udget every year, beginning in 1974 As the table indi- cates, a line-item veto of just 1 percent of total spending would have reduced the projected FY 1985 deficit by $105 billion. the President had cut 2 percent of discretionary, or "controllable governm e nt spending 265 billion in FY 1985), the projected defi- cit would be reduced by $49 billion If Table 1 THE LONG TERM EFFECTS OF A LINE-ITEM VETO in billions of dollars 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 estimated 1985 (projected Assum i ng 1 percent of all Actual spending cut per Spending year 268 324 365 40 1 448 49 1 577 65 7 728 796 854 928 265 3 18 354 386 426 462 538 687 665 720 764 823 Reduction in FY 1985 deficit 105 Assuming 2 percent cut of "con trollable" spending per year 266 320 36 1 394 438 477 561 636 702 764 879 49 816 Note: 1984 and 1985 "actuals" are CBO estimates. 5 Table 2 illustrates the likely consequences of instituting a line-item veto for FY 19

85. If the President cut 1 percent from the budget each year, the total savings over the next five years could amount to 174 billion, and the FY 1989 spending would then be reduced by 65 billion. If the President were to cut two percent from only lfcontrollablell items, the total five year savings would still be 99 billion, a nd the FY 1989 spending reduction would be 37 billion (assuming controllable outlays remained at 27 percent of total budget outlays Table 2 THE LONG TERM EFFECTS OF A LINE-ITEM VETO in billions of dollars projected spending 1985 928 1986 1012 1987 1112 19 8 8 1227 1989 1342 Reduction in FY 1989 deficit Assuming 1 percent cut of all spending per year 919 992 1080 1179 1277 65 Assuming 2 percent cut of "con trollable" spending per year 923 1001 1093 1200 1305 37 Source: Calculations based on CBO budget project i ons It is not clear which constituency has the most to lose from a line-item veto. For instance, of the $260 billion that could be made subject to the line-item veto in FY 1985, two-thirds would be defense spending. That means that for every $1 of non-def e nse spending open to the line-item veto, the Pentagon would risk up to 2. Moreover, the fastest growing segments of the budget, interest and entitlements (constituting 55 percent of the budget) would not be affected by the veto. Advocates of a strong defe nse are understandably cautious about a line-item veto that puts at risk twice as much defense spending as non-defense spending.

Cuts in Pork-Barrel Programs The line-item veto could be an effective deterrent to the practice known as "logrolling.1f This oc curs when members of Congress vote with one another on a quid pro quo basis to pass appropriations for programs benefitting local areas and interest groups--even though each program would fail to win a majority on its own. The result is that Congress pass e s appropriations bills loaded with costly amendments and riders that provide benefits to local constituencies. 6 A line-item veto specifically would allow for the President, the only official in the U.S. who must answer to the country as a whole, to cance l such spending on a case-by-case basis according to national interests. By returning these projects to Congress for reconsideration on an individual basis, the President would have the power to break the logrolling coalition. The line-item veto seems to b e the best available defense against logrolling and omnibus spending resolutions.

OBJECTIONS TO THE VETO Passing the Buck The line-item veto is viewed by some excuse for Congress to abandon the search priations process. Senator Lawton Chiles fears that Con gress however, as just an for a responsible appro D-FL), for instance would add to program after program, making all our constituents happy and never have to look at the bottom line. President. He woild cut the bill back down to size and be the sp~ilsport We could pass that responsibility over'to the State experience gives some support to this view. Political observers argue that the Illinois legislature, for instance, adds funds to the budget in hope that the governor will veto them.

But strong institutio nal constraints on total spending, such as balanced budget legislation, reduce such politicizing at the state level At the federal level, a strong binding budget resolution would also reduce such opportunities. But it should not be forgotten that the.line -item veto is an executive branch responsibility, with potentially significant political liabilities as well as benefits.

Presidential Pork-Barrelling State experience also suggests that Itjust by having [the line-item veto you can avoid getting a bill you don't want says Robert Wilburn, former Pennsylvania budget secretary.

ItExactly,lt retort opponents--the President could use the threat of a line-item veto to further his political interests. He could, for instance, hold hostage discretionary projects su pported by Congress to force significant increases in defense spending, they argue, or he could target his veto against political opponents in election years.

Upsettinq the Balance of Power Many congressmen claim the line-item veto violates a literal inte rpretation of the Constitution--which vests spending power in Congressional Record, August 4, 1983, p. S11729. 7 the Congress. No state or federal court has handed down any decision to this effect, and the Law Division of the Congressional Research Servic e has determined that Senator Armstrongts beefed-up rescission proposal would be con~titutional Since there seems to be little difference in principle between Armstrong's rescission proposal and a line-item veto, the veto's constitutional critics need to m a rshal1 better evidence to support their case there is historical precedent for a presidential refusal to accept specific appropriations. Between 1921 and 1974, the President possessed unilateral and absolute .impoundment powers; he could refuse to spend a p propriations without any explanation to Congress. House of such power Moreover The 1974 Budget Control Act stripped the White Opponents also fear that the line-item veto would grant nearly unilateral authority to the President, because he could veto a pro g ram if he could hold the backing of just one-third of one chamber of Congress. But if the veto could be overridden by a congressional vote of only fifty percent, as Senator Mattingly's proposal provides, this objection might be overcome-since any program of truly national importance presumably could win majority support.

The general argument that a line-item veto would circumvent the intent of the Founding Fathers holds less weight when viewed in the context of the structural changes that have altered the institutional balance of power firmly in favor of Congress. Moreove r , although the Constitution specifically limits the president's veto powers to entire bills it is not exactly clear, according to some experts, what the Founding Fathers meant by a In early years 'lbillsll were limited in their scope of authorizations and financing--it is unlikely that the Founding Fathers envisaged the passage of single bills with $316 billion of spending authority (a tenth of the nation's entire output As Senate Finance Committee Chairman Robert Dole (R-KS) noted in congressional debate d uring the Carter Administration, Itthe growth of the size of appropriations bills has eroded the intent of the original veto provision of our Constitution and I believe that erosion should be reversed.t16 The balance of power has also shifted away from th e President in the last ten years as the rules on germaneness have become largely ineffe~tive The Constitution did not intend for Congress Letter from Raymond Celada, Congressional Research Service, to Senator William Armstrong, October 17, 1983.

Cdngressional Record, March 10, 1977, p. S7199.

The standing rules of the Senate provide that "no amendment which proposes general legislation shall be received to any general appropriations bill nor shall any amendment not germane or relevant to the subject matte r of the bill be received I' Congress typically ignores these rules in order to attach politically controversial amendments to critical appropriations bills 8 to attach non-germane authorizing language to critical appropria tions bills in order to pressur e the President into accepting those special interest additions.

Moreover, while Congress has assumed more extensive budgetary powers, it has failed to assume the corresponding fiscal responsi bilities. The line item veto proposal offers a means to effect such fiscal responsibility, and to restore the balance of power existing prior to 1974 create an lfimperialll presidency. It is not a revolutionary attempt to STATE EXPERIENCE Forty-three state governors now have line-item veto power over appropriations. These states adopted the veto after the Civil War and none of the states subsequently has withdrawn it--clear evidence that the veto is both popular and workable.

California Governor George Deukmejian llpopularizedlf the line item veto in the media last su mmer when he "blue pencilledll $1.2 billion in legislative requests to avoid tax increases. But Deukmejian has not been the only governor to flex his line-item muscles. In Illinois, Governor James Thompson routinely slices about 3 percent off appropriatio ns bills each year to keep the budget balanced. And during his eight years in Sacramento, Ronald Reagan used the line-item veto to reduce the legislature's spending plan by an average of 2 percent a year.

Learning From the States The simple fact that no li ne-item veto law has been repealed in any of the 43 states that enacted it is clear testimony to its success and acceptance. But state experience also suggests that some problems would need to be solved before a federal version of the veto would be succes sful.

The primary hurdle would be the ambiguity over the term lfitern.l1 Opponents of the proposal contend that the vagueness surrounding the term would mean granting the President uncertain power. The issue could be a stumbling block in the line-item veto initiative. Litigation in the states has centered on the precise meaning of the term lfitemlf and whether it would encompass reductions as well as disapprovals. Contradictory decisions have been handed down in different states; for instance, in Oklahoma a nd Illinois.8 A bill that specifies that the President must ap- prove or reject an entire line appropriation, might lead to such questions as: Would individual projects within a military con struction or mass transit appropriation be subject to line-item S ee State Universitv v. TraDD. 28 Okla. 81. 1911. and PeoDle ex rel. State Bd. v. Brady, 227 Iil. 124,Ai917. 9 scrutiny, or would the President be confined to action only on major appropriation headings Senate Majority Leader Howard Baker (R-TN) is concern ed that this confusion would allow Congress to manipulate the language of bills to avoid the line-item veto. Says Baker I1 am really afraid if we had line-item vetos Congress would start sending the President appropriations bills with just one line."

Senat or Mattinglyls bill may deal with this problem by grant ing the President sweeping authority to reduce or disapprove any part of an appropriation and potential court conflicts over presidential power, but it would also grant the President very extensive p o wer over the federal pursestrings--and so is not likely to receive congressional approval in its present form. The senator has sought to balance this sweeping power, however. A recently introduced amended ver- sion of S. 1921 would allow Congress to overr ide a line-item veto with a simple majority.

Ilreapprovedll after two years This would eliminate any ambiguities It would al& require the veto to be CONCLUSION The line-item veto faces considerable opposition from two Legislators who wish to protect their groups within Congress. ability to force acceptance of pork-barrel spending and non- germane authorizations have every reason to oppose the proposal.

In addition, legislators who are concerned that critical defense systems could be the primary targets of future presidential vetos understandably hesitate supporting the device.

Senator Dole has reminded the first group that they have clear obligations to the country III do not impugn those members of the Senate who support such (pork-barrel),Il says the Fin ance Committee chairman, Ifbecause it is our duty to do as much as we can for our states. However as a group I believe that we could all endorse an institutional change which would eliminate some of this I The fears of the second group, however, must be w e ighed carefully in assessing the full political costs and benefits of the line item veto. Moreover, critics of the line-item veto should remember that the Constitution was written in the context of one set of political parameters and institutional conditi o ns and that those parameters and conditions have changed. The budgetary process can only achieve the purposes of the Constitu- tion if it is adapted to these new circumstances. A legislated line-item veto could restore the balance of power originally in t ended by the Founding Fathers, without intruding on the clear intent of the Constitution.

Most concerns over the constitutionality of the line-item veto appear to be little more than political rhetoric. The I 10 President enjoyed unilateral impoundment pow ers for over fifty years during this century tical problems. Conservatives, for instance, must ponder the fact that a liberal President could block certain weapons systems approved by Congress. And the best mechanism for introducing such a veto is by no m e ans clear. State experience suggests that the least problematic method of instituting a line-item veto would be to accompany it with a statutory rule granting the President the right to disapprove or reduce any part of any appropriation bill. executive re v iew to its logical conclusion A rule of this kind could be achieved by amending existing rescission powers such that a rescission would stand unless Congress explicitly overrode it. In order to make such sweeping executive review palatable and to reduce t h e danger of a President preempting spending priorities it would be prudent to allow congressional override with less than a two-thirds vote Yet the line-item veto proposal is still wrought with prac Such language would carry the principle of A line-item v eto would be no fiscal panacea.

Nor would it deal with many of the It does not even address the primary federal spending problem--the spiraling growth of entitlements serious shortcomings of the congressional budget process. But by taking the handcuffs off the President in the appropriations process, the line-item veto would constitute an important first step toward fiscal responsibility John Palffy Policy Analyst