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CongressLine: Congress and Money

By Paul Jenks, Published on October 29, 2008

This year has been the ideal year to study the myriad of ways Congress acts to spend money. The Congressional appropriations process this year has provided a multitude of interesting examples of the wide variety of tools available to Congress and the federal government for appropriating money, beyond just the ordinary appropriations bills in Congress.

Normally at this time of year, I am plowing through the details of the various appropriations bills, looking for details on some specific program or funding restriction, but not this year. The Appropriations bills in Congress this year were mostly moribund. Only three measures (Defense, Homeland Security and Veterans Affairs) were approved, while the others sit as a forlorn testament to one of Congress’ guiding principles: if it does not have to get done, Congress will not press to get it done. Despite this truism however, the government continues to function and is spending more than ever.

Of course, how could this be, since one of the primary reasons for the creation any modern parliament or legislature is to provide a democratic body to control the public purse? There are a few forces coming together this year that have led to this appropriations situation. First, a variety of events and realities have collided this year to create real ambivalence in Congress towards the crafting appropriations legislation. Second, modern technology provides tools to transfer money that was unimaginable a short time ago. Lastly, very old concepts of government borrowing continue to let Congress off the hook on appropriations.

I begin with the federal bailout of Wall Street banks. While Congress did have to approve the authorization to do so, not a single penny of the $700 billion now available to the Treasury was actually appropriated by Congress. Congress merely authorized the Treasury to go borrow the money. In one week, an amount close to the cost of the seven years Global War on Terror was authorized by Congress to spend on a financial rescue package for Wall Street. An equal additional amount is currently being borrowed and spent (or loaned) by the Federal Reserve under its own independent authority.

Borrowing money is not new; for the U.S. government it is older than the Republic. Borrowing money without an appropriation is also not entirely new either, since vast entitlement programs function on automatic appropriation from Congress, most of which needs to be borrowed. The rescue package thus is a good example how Congress can fund government projects without having to worry about balancing the books.

Another example this year also runs counter to the normal appropriating process in Congress. Normally an election year would be a great opportunity for members of Congress to demonstrate their concern for their constituents by inserting thousands of earmark requests in appropriations bills, designating specific funding for pet projects back home. The pet projects provide a great opportunity to demonstrate the hard work the legislator has been doing in Washington, DC. This year it is just too difficult and there is just not enough time. The President will surely veto any measure that comes forth out of the Democratically controlled House, and the collegial, deliberative Senate would be hard pressed to make up the difference anyway.

A third example is a maneuver to counter the second point on earmarks. An adjunct part of the appropriations process has become the principle method by which Congress handles new spending priorities. This adjunct processs is a supplemental appropriation bill. It is not an unusual concept and has been used fairly often over the years, but has become a principle appropriations legislative vehicle this year. Its rise to increased prominence is the result of the Iraq and Afghanistan wars. All funding for the wars since their beginning has been through a supplemental appropriation that is normally reserved for extra funding for disasters that were not anticipated in the regular bills. Another convenient trait of supplemental appropriations bills is that concern about whether there is money in the Treasury to pay for things is usually igorned. The wars and most items in recent supplemental bills have not been offset by increased taxes or reductions in spending elsewhere.

The President has been consistent in insisting that supplemental appropriations bills only fund the Iraq and Afghanistan wars, while Congress has not felt the same way. The last supplemental bill that passed at the end of June included money for wars and more money for other things. The Iraq war and almost continuous weather calamities have created a situation where there is almost always a supplemental appropriations measure on deck in Congress. Perhaps now you understand why regular appropriations bills are not that necessary? Why bother when you have the opportunity to adjust spending priorities in a supplemental appropriations bill?

A fourth factor on appropriations relates to the process of passing a bill in Congress. It is always complex, but the current realities in Congress make it even more complex. In the House, the majoritiarian rules favor the Democrats, who can propose and pass any bill they choose with minimal or no Republican problems. But, the Republicans are not without some procedural tools. The procedural prerogative that frightened the Democrats to abandoning appropriations bills this summer was the fear of Republican maneuvers to garner a vote on increasing domestic oil production on the coasts and in Alaska. Making matters more uncomfortable is the fact that current prohibitions to offshore oil drilling were a restriction written into last year’s combined appropriations bill. The restrictions were set to expire, along with all the other parts of the bill, on September 30, 2008.

Another complexity involves a strong and vocal minority within the Democratic Party in the House called “Blue Dog Democrats.” Blue Dogs are strict about not spending additional money without offsetting it by taxes or cuts in other spending. The increasing complexity of the political calculations, especially in a pivotal election year, is a sure recipe for congressional inaction.

Yet another element relates to political considerations that are at play on the timing of appropriations bills. Democrats in Congress are counting on an improved majority in both chambers next year making the deliberative process much easier. They are also hopeful that a Democrat will be elected President, making complete passage of measures that reflect the party’s priorities easy. They can wait until January 20, and quickly pass all the remaining nine appropriations bills, or pass one giant bill that includes all the unpassed bills from this fall, without any trouble. Of course, many different political and economic events could alter this plan in the meantime.

A seventh factor, and the most intriguing, is the rise of the idea of an “economic stimulus” measure. This is of course not new; the concept of a stimulus bill dates back to the Truman administration and usually was special legislation that adjusted something about federal fiscal policy, adjusted tax rates or instituted new tax credits to stimulate the economy. Stimulus bills were always very technical and hard to explain, but not now. The advances of federal tax technology have created a new tool for these types of bills. In 2001, Congress tried something very novel, couched in a quasi-economic stimulus and tax reform measure and led by a brand new President, by passing a stimulus/reform bill that sent cash directly to hundreds of millions of citizens. A check was cut at Treasury and mailed to every single taxpayer (who qualified, and most did). It was a novel idea and certainly Congress would have done it before, but the process of printing up millions of checks, and verifying taxpayer status, would have been too daunting in the old era of filing cabinets and carbon paper. Everyone was happy, and who wouldn’t be?

The idea was resurrected this year as pure stimulus measure to try to revive the economy and the checks were sent out again over the summer. Another measure may be considered in November that sends out another check, this time for taxpayers to cope with the financial panic. Sen. Barack Obama (D-Ill.), the Democratic presidential nominee has called for an immediate energy rebate ($1,000 per family), which may happen next year. If earmarks were a good tool to demonstrate the hard work of Congress in Washington, DC, cold hard cash in the voters’ hands on Election Day would be an even better tool. Again, why bother with the appropriations bills?

On February 1, 2008 the president proposed a $3.1 trillion fiscal 2009 budget. Congress proceeded to ignore the president’s request and using the various methods I have noted, decided to spend, according to my calculations, an additional $2.3 trillion on an assortment of other worthy initiatives. Sometime next year, Congress will get around to approving the original $3.1 trillion, then work on next year’s budget. Following the budget used to be boring job. Not anymore.