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CED’s Policy Backgrounders provide timely insights on prominent business and economic policy issues facing the nation.
The Administration has signaled its intent to challenge current law that limits the President from impounding, or canceling, funding appropriated by Congress. This legal dispute will ultimately go to the Supreme Court, which must decide the extent of Presidential authority to override spending decisions by Congress.
In the early 1970s, President Richard Nixon defied Congress by refusing to fully spend appropriated funds for social programs. As lawmakers challenged the President’s actions in court, President Nixon argued that Congress did not have a formal budget process to aggregate spending and revenue policies and relating total spending to total revenue, meaning that Presidential decisions to “impound” funding were necessary to restrain total spending and deficits. In response, Congress passed the Congressional Budget and Impoundment Control Act of 1974 to limit the President’s ability to impound funding and establish the current Federal budget process. The Supreme Court agreed with Congress’ view in a case on funds withheld in 1972 in Train v. City of New York (1975).
Title X of the law (the “Impoundment Control Act” or ICA) constrains Presidential authority to spend less than Congress appropriates. The ICA classifies impoundment into two distinct categories: a “deferral” that delays the use of funds and a “recission” (a request to Congress to cancel an appropriation or other form of budget authority). The ICA specifies the process for the President to request a rescission of funds or withhold appropriated funds from obligation. The President must submit a special message explaining the amounts to be rescinded, the estimated fiscal and program effects, and the reasons for rescission. Funds may be withheld for 45 days as Congress considers the request.
Under expedited procedures to facilitate review of the request that limit committee consideration and restrict floor debate, Congress may pass a bill that includes all or part of the requested rescission. If Congress has not completed action on the request within 45 days, the President must release the funds. The Government Accountability Office (GAO) oversees the Executive Branch’s compliance with the ICA. The President may request rescissions outside of this process, but funds may not be withheld while Congress reviews these separate requests. Congress may also rescind funds on its own under the standard legislative process.
While the Supreme Court has not yet considered the constitutionality of the ICA’s deferral and rescission provisions, other courts have ruled that the ICA is constitutional. In 2013, the US Court of Appeals for the District of Columbia stated that the ICA’s prohibitions on impoundment are valid law. The court cited a 1969 memorandum (during the Nixon Administration but before the impoundment crisis in 1974) by Assistant Attorney General (and later Chief Justice) William Rehnquist regarding the impoundment of funds appropriated for financial assistance to Federally impacted schools, which said that “[with] respect to the suggestion that the President has a constitutional power to decline to spend appropriated funds, we must conclude that existence of such a broad power is supported by neither reason nor precedent.”
The Supreme Court has also assessed the constitutionality of a related mechanism to reduce funding appropriated by Congress known as the Presidential line-item veto, which grants the President the ability to reduce specific appropriations passed by Congress before enactment of the 12 appropriations bills instead of a full veto of the legislation. In 1996, Congress enacted the Legislative Line Item Veto Act, permitting the President to cancel any amount of entitlement, cancel in whole any amount of increased appropriation, and to remove certain tax benefits, with the money being canceled used to reduce the deficit. The law included powers for Congress to disapprove the President’s veto. The Supreme Court ruled this legislation unconstitutional in 1998 in Clinton v. City of New York because it violates the Presentment Clause of the Constitution by giving the President the ability to amend legislation presented by Congress.
The Administration has a dramatically different view on the President’s power to impound funds. During the campaign, the President said “it was undisputed that the president had the constitutional power to stop unnecessary spending” through impoundment, promising to use “long-recognized impoundment power to squeeze the bloated federal bureaucracy for massive savings.” In his confirmation hearings, White House Office of Management and Budget (OMB) Director Russell Vought repeatedly expressed that he and the Administration believe the ICA is unconstitutional. Director Vought said, “We will faithfully uphold the law. The president ran on the notion that the Impoundment Control Act is unconstitutional. I agree with that.” He also hinted that the Administration plans to conduct a review led by the Justice Department to explore the "parameters of the law with regard to the Impoundment Control Act."
The issue came to a head quickly when OMB released a memo in late January directing Federal agencies to review all Federal financial assistance to identify programs, projects, and activities that may be implicated by the President’s executive orders, requiring Federal agencies to temporarily pause all activities related to obligation or disbursement of all implicated Federal financial assistance. This Federal funding freeze provoked strong backlash and immediate legal challenges. Director Vought argued in his confirmation hearing that “[what] the president has unveiled already are not impoundments. They are programmatic delays”; however, the Administration did not follow the recission procedures specified in the Act. In response Democratic Senators noted that OMB held up $214 million in military aid to Ukraine in 2019 when Director Vought was also head of OMB, which the Government Accountability Office later ruled violated the ICA.
Since then, the legal challenges to the Administration’s Federal funding freeze and other moves to suspend funding have continued to move through the courts. As an example, a US District judge blocked on February 13 the Administration’s efforts to suspend nearly $2 billion in foreign assistance to humanitarian organizations as part of its dismantling of USAID. In his ruling, US District Judge Amir Ali said, “The Executive not only claims his constitutional authority to determine how to spend appropriated funds, but usurps Congress’s exclusive authority to dictate whether the funds should be spent in the first place. In advancing this position, Defendants offer an unbridled view of Executive power that the Supreme Court has consistently rejected – a view that flouts multiple statutes whose constitutionality is not in question.”
The Administration quickly appealed the case to the Supreme Court. After temporarily pausing Judge Ali’s order, the Court ruled in Department of State v. AIDS Vaccine Advocacy Coalition that he could continue to enforce his order to resume the Congressionally approved funding. Justices Alito, Thomas, Kavanaugh, and Gorsuch dissented, with Justice Alito writing, “Does a single district-court judge who likely lacks jurisdiction have the unchecked power to compel the Government of the United States to pay out (and probably lose forever) 2 billion taxpayer dollars? The answer to that question should be an emphatic ‘No,’ but a majority of this Court apparently thinks otherwise. I am stunned.” However, while the Court majority did not give its reasons for upholding the order, one reason could easily be that the Administration has no right to stop spending of these funds appropriated by Congress.
Considering this case and related legal actions, some Republicans in Congress have called for the President to propose a rescission package to codify the funding cuts that the Department of Government Efficiency (DOGE) has been making. Senator Rand Paul (R-KY) said, “I’d love to see a $500 billion rescission package. The Republicans right now in the Senate are actually agitating to increase spending. I'd much rather be voting on a bill to reduce spending than increase spending." Senator Paul pitched his plan to Elon Musk, the leader of DOGE, who reacted favorably, particularly because any rescission package would only require 51 votes in the Senate, bypassing Democratic opposition. Senate Budget Committee Chair Lindsey Graham (R-SC) also supports the plan: “It would be a big mistake if we don’t [vote on rescissions]. It’s the one way to make DOGE cuts real.”
Nevertheless, there has been no movement from the White House on a rescission package. Some Senators are skeptical that the Administration would ask for Congressional approval of spending cuts given how DOGE has operated so far. Senator Lisa Murkowski (R-AK) said, “Do you think that they’re asking for us to vote on this?” Senator Paul added, “There are forces in the administration who want to simply fight the constitutionality of the Impoundment Act. You might argue that there might not be an incentive to send a rescission package if you plan on fighting the constitutionality of the law.” Republican Senators may also be wary of what happened the last time Congress considered a rescission package. During the President’s first Administration in 2018, Republicans in Congress attempted to pass a rescission package of $15 billion in spending cuts, only to lose the vote in the Senate when Senators Susan Collins (R-ME) and Richard Burr (R-NC) voted against it.
As Senator Paul acknowledged, the Supreme Court will ultimately decide whether the President has the impoundment authority that his Administration claims. These impoundment discussions and the push for spending cuts coincide with Republican efforts to pass the President’s legislative agenda of tax cuts and other priorities through the budget reconciliation process. Senate Majority Leader John Thune (R-SD) has set a goal of agreeing a concurrent budget resolution with Republicans in the House of Representatives by April 11. Among the major themes of these negotiations will be the deficit impact of proposed extensions of the Tax Cuts and Jobs Act, the level of spending cuts needed to reduce the deficit impact of the legislation, and whether to include an increase in the debt ceiling, with the Congressional Budget Office this week projecting that the Federal government will reach the “X” date of default sometime in August or September 2025. The next few weeks will be crucial for Congressional Republicans and the President as they work to advance their legislative priorities.
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