June 2, 2023

Nixon + Congress = $32 Trillion in Debt

It’s turned out that the 1974 impoundment control act was a disaster.

Context. Perspective. Background.

It’s not news to anyone that the major media consistently fail to provide any of those things when covering the burning political issues of the moment.

Take, for example, the compromise the House of Representatives and the White House just made to settle the federal budget and debt-ceiling crisis.

We know from the media that it will lift the debt ceiling for two years, make some minor spending cuts and avert a financial apocalypse that supposedly would have destroyed the U.S. dollar, crippled our economy and caused the Earth to fall into the Sun.

But what we don’t know from the media, per usual, is the cause of these recurring budget fights and national debt crises in Washington.

Where do they come from? Why does the richest country in history keep having these last-minute money emergencies?

Well, the news media are too busy taking sides to get around to explaining it.

But if you look at the history of federal budget deficits, you’ll see that something important happened in 1974 — they started spiking.

1974 was the year Richard Nixon was being brought down by the Watergate scandal.

Until then, presidents had the ability to hold down the federal budget by impounding or refusing to ever spend money that Congress had allocated.

Lots of presidents before Nixon used the impoundment weapon, but it was almost always for small-change items and without huge political fights.

But Nixon, who had denounced the Democrat-run “credit-card Congress” for spending too much and causing budget deficits and inflation, impounded tens of billions of dollars for programs he didn’t like.

Telling Congress to not spend more than $250 billion a year, he threatened to veto any appropriations bills that went over that limit. He also started a Constitutional crisis by telling Congress that the Constitution said the president had the ultimate say on whether to spend money.

Congress was not pleased by Nixon’s executive power plays.

To regain almost total power over the federal purse, and to put Tricky Dick in his place, Democrats came up with the Congressional Budget and Impoundment Control Act of 1974.

Sold as a reform in the budgeting process, the act ended presidential impoundments and even dictated that the president can be charged with contempt of Congress if he doesn’t spend all of the funding that is allocated.

The act, a complex change in congressional sausage-making, had serious, long-term unintended consequences.

Nixon, badly weakened by Watergate, had to sign it, which allowed Democrats in Congress to go on a drunken spending spree that lasted for decades.

Just one year later, under President Ford, the federal deficit jumped from $7 billion in 1974 to $54 billion.

It ranged from about $30 billion to $80 billion through the Carter era and hit $120 billion in 1982, my father’s first budget year. It hovered around $200 billion for the rest of the 1980s.

Then, in the 1990s, the annual budget deficit soared into the $300 billion range until 1998, 1999, 2000 and 2001, when Bill Clinton, thanks to pressure from the Republican House led by Speaker Newt Gingrich, miraculously racked up Washington’s only surpluses in the last half century.

For the last 23 years, the red ink has steadily gotten worse.

Under the high-spending Bush II, Obama, Trump and Biden regimes, and spiked by crises like 9/11, the Great Recession and the covid pandemic, the annual deficit has climbed to above $1 trillion.

It’s turned out that the 1974 impoundment control act was a disaster.

It put too much trust in 535 untrustworthy politicians to do the right thing and it put too much faith in the ability of voters to keep them from spending like drunken congressmen.

Getting rid of impoundments gave Congress the extra power it didn’t deserve to drive our national debt to $32 trillion.

And based on what’s happened this week, it’s only going higher. That’s this week’s history lesson.

Copyright 2023 Michael Reagan

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