Understanding Presidential Line-Item Vetoes, Rescissions, and Deferrals

President Trump sees much unwanted spending authorized by Congress

Senior Fellow and Director, Center for the Economics of the Internet

President Trump sees much unwanted spending authorized by Congress.  What is he to do? The unimaginative advice says: “Hold your nose, and spend the money.”  More imaginative advice says to ask Congress for a rescission—a change in law, or a line-item veto.  But Congress will never give the president a line-item veto, and only rarely rescission authority.

There is a different and better option, one often used before 1974 but rarely since. President Trump could lawfully simply defer spending certain funds until a later date, at least until the end of the fiscal year. Unlike rescissions, deferrals require little if any approval from Congress.

In 1974, Congress passed the Budget Impoundment and Control Act partly in response to President Nixon’s impoundments.  That law established various federal budget procedures that form the basis of the current federal budget. The law also established two rarely used procedures: rescissions and deferrals.

Every president has observed unwanted and even harmful spending authorized by Congress. For the better part of 200 years, presidents confronted unwanted spending and expanding deficits in various ways.  Some cajoled Congress to reconsider spending. Others, such as President Nixon, simply refused to spend certain authorized funds, labeling them as “wasteful,” “unnecessary,” or worse.   These episodes of presidential non-spending were often called “impoundments.”

Under the 1974 Budget Act, the president may submit to Congress rescission requests, permanent changes in budget authority that require majority-vote approvals in both houses of Congress within 45 days.  If Congress does not act within 45 days, the rescission request is disapproved, the president cannot seek rescission authority for the same funds again. The congressionally-approved budget authority must be followed. Even an amateur congressional observer knows that the odds of Congress meeting a 45-day deadline are small. Rescissions rarely happen.

In contrast, the odds are overwhelmingly in the president’s favor with deferrals.  Although a deferral can only last until the end of the fiscal year, it is difficult for Congress to block a deferral.  A deferral requires a presidential request to Congress with a stated reason and analyses of economic and budget consequences for the deferral.  A deferral can be proposed, among other reasons, to meet “contingencies” or “savings.” If Congress does not act, the deferral remains in effect at least until the end of the fiscal year.

It is not even clear that Congress can unambiguously block a deferral.  The 1974 Budget Act provides for “resolutions of disapproval.”  Resolutions are expressions of congressional sentiment but usually are not enforceable laws.  Even if a resolution of disapproval were binding on an initial deferral, nothing in statute prohibits a president from resubmitting a deferral request to Congress again, starting the process anew.

Parties might run to court to seek an order compelling congressionally mandated spending authority. But the language of the 1974 Budget Act, which states that the president has effectively unlimited deferral authority, is unambiguous. There is no clear court precedent that any statute prevails over this language. The Supreme Court might eventually find that deferrals are limited in duration, or the justices might find otherwise.

For many federal programs, a deferral of even a few weeks could prove devastating to the programs’ supporters and beneficiaries. When part of the federal government shuts down after Congress fails to pass a spending bill, there is widespread anxiety even when full spending is all but certain to resume in a matter of a few days if not hours.  Imagine the anxiety if the spending lapse were targeted at a single program and the restart date were as much as a year.

Although deferrals are not intended to last beyond the end of a fiscal year, they could be effectively extended further. A deferral to the last day of a fiscal year would give a program exactly one day of budget authority to spend money. The bureaucratic processes limit how much can be spent in a short period of time such as a minute or even a day. Even if budget authority could be carried over to the next fiscal year, the president could request deferral again for the budget authority to the end of that fiscal year.

Most observers correctly note that rescissions would require careful orchestration between the president and congressional leaders to ensure support.  Deferrals require no such coordination. Deferrals may be troubling for a well-functioning democracy. They are extraordinary powers rarely exercised by a president. The wonder is why.