To Control Spending

January 6, 1958

With the present missile scare and deflation scare, the outlook for government economy is even dimmer than it was a year ago. The main hope of those who would like to see the Federal budget under some sort of responsible control lies in reforming the budget-making process itself. An opportunity exists in the very fact that Congress will probably be asked to raise the debt ceiling again. If Congress feels forced to do this, it can and should exact a price.

The minimum price should be a reform urged by the Hoover commission—that Federal expenditures be placed on an “annual accrued basis.” This technical term means simply that Congress should provide funds only for work done or services and goods actually received by the government in the fiscal year. Only by this reform can Congress regain the “power of the purse”—the control over annual spending—that it has lost.

Our Federal fiscal practices have become so complicated and involved that few laymen—and, in fact, few congressmen—understand them. It is still not clearly and generally understood that the Federal government has two budgets—the obligation budget and the expenditures estimates. Congress has control today only over the money it appropriates in any year; it does not have control over how much money is actually spent each year. Its present practice is to appropriate the entire sum necessary to complete a given Federal project regardless of how many years that project actually will take. This practice has resulted in some huge annual “carryovers” of unexpended Federal funds. These now are in the neighborhood of $70 billion.

HOW CONTROL IS LOST

The results of this practice were brought out graphically by Sen. Harry F. Byrd in a statement on Oct. 2 last: “On the last day of the session I estimated that the President’s January appropriation requests had been reduced by $6 billion or more, and I called upon the President to reduce expenditures by the same amount. The President’s mid-year review clearly indicates that these reductions in appropriations will result in virtually no reductions in Federal expenditures this year. Obviously the President will use unexpended balances in previous appropriations to keep expenditures at the level he estimated last January, or higher. This is contrary to the intent of Congress, which expected a substantial part of the reductions in appropriations to be reflected in this year’s expenditures.” The situation, the senator concluded, “clearly shows that Congress has lost control over Federal expenditures and makes it imperative that this control be recaptured.”

ANNUAL REVIEW

In a twelve-page pamphlet just published by the Citizens Committee for the Hoover Report, the case for “annual accrued expenditure budgeting” (or “pay-as-you-get”) is very clearly and ably presented, and objections systematically answered. I should like to deal here with one argument not covered by the committee’s report because it seems to me typical of the kind of objection now most likely to be heard. It was voiced by Hanson W. Baldwin in The New York Times of Aug. 22: “The Defense Department does not exist to show a profit-and-loss statement or to keep nicely balanced books. It exists for one purpose only—national security and combat effectiveness. If we emphasize the business ideal of cost accounting at the expense of combat effectiveness, we are lost.” This is clearly a false antithesis. Proper accounting practices are designed precisely to increase effectiveness and to detect and prevent misspending of limited resources. Wholly apart from the undemocratic nature of such a system, it would not increase combat effectiveness to deprive Congress of the right of annual review and control of expenditures.

H.R. 8002, the House bill which provides for placing Federal expenditures on an “annual accrued basis,” has twice passed the Senate unanimously in an even stronger version. It has been endorsed by the President, by former Secretary Humphrey, by the Director of the Budget, and unanimously endorsed by the House Committee on Government Operations. It should be budget reform No. 1.