Nixon Impounded the Money, Congress Fought Back, and the 1974 Law Still Rules

Suppose you hire a contractor to build a deck, and you hand him a check, and he decides on his own that the deck is a bad idea. He keeps working on the rest of the house but never builds the deck. Is he saving you money? Or is he ignoring the one instruction you gave him? You can argue it both ways, and Washington has been arguing it for over two hundred years. Congress passes a spending law. The president signs it, or it passes over his veto. Then the White House decides, for reasons of economy or policy or politics, not to spend the money. That is called impoundment, and it is one of the oldest and most stubborn disputes between the two political branches.

If you are a conservative, you may start out sympathetic to the president on this one. Washington spends too much, and a president who refuses to spend a dollar of waste sounds like the right instinct. Hold that thought. I want to show you why even that instinct runs into the Constitution, how Richard Nixon turned it into a crisis, and why the law that came out of that crisis is the framework every spending fight since has used.

The text: two clauses pulling in opposite directions

Two parts of the Constitution frame the issue.

The Appropriations Clause is in Article I, Section 9: "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." Money cannot leave the Treasury unless Congress passes a law permitting it. That is the power of the purse, and it belongs to Congress.

The Take Care Clause is in Article II, Section 3. The president "shall take Care that the Laws be faithfully executed." An appropriation is a law. Think about that for a moment. If the president picks and chooses which spending laws to follow, is he taking care that the laws are faithfully executed?

Defenders of presidential discretion point to the executive power vested in the president by Article II, and to the practical reality that agencies often cannot spend every dollar they are given. A project is delayed, a contract is cheaper than expected, a program finishes early. Everyone agrees that some unspent money is not a scandal. The fight is over the line between prudent management and a refusal to carry out the policy Congress chose.

Jefferson's gunboats, 1803

The first example usually cited is from Thomas Jefferson. In 1803, Congress appropriated money for gunboats, and Jefferson, according to his own report to Congress, held back spending of the funds. The reason he gave was that the Louisiana Purchase had changed the situation and the money was no longer needed for the purpose. The details are old and thin, but the pattern is worth noting. Early presidents who delayed spending usually told Congress about it, offered a reason that turned on changed facts, and did not claim that they could cancel the policy. For roughly a hundred and seventy years the practice stayed small, and Congress mostly let it be.

Nixon, 1972: the crisis

Then came Richard Nixon. In 1972, Congress passed the Federal Water Pollution Control Act Amendments, which most people now call the Clean Water Act. It authorized billions of dollars to help build sewage treatment plants and clean up the nation's waters. Nixon vetoed the bill on October 17, 1972, partly on cost grounds. Congress overrode the veto the same week, with large bipartisan majorities in both houses.

Then Nixon did something new. He directed the head of the Environmental Protection Agency to allot only part of the money, withholding billions of dollars that Congress had made available. His administration claimed that the Constitution gave the president a power to decline to spend, and that the veto override did not take it away. Nixon did not stop there. During his time in office, his administration held back funds across a range of domestic programs, and Congress and the courts saw a pattern: a president using the spending pen as a veto after the veto had been defeated.

Think about what that does. The Constitution gives a president one tool when he disagrees with a bill: the veto. Congress can override it with two-thirds of both chambers. A president who loses that fight and then declines to spend anyway has, in effect, given himself a second veto that Congress cannot override. That is the heart of the objection, and it is what made the fight a constitutional crisis rather than a budget dispute.

Cities and states sued. Dozens of lower court rulings went against the administration. Congress took notice, and the Senate and House both worked on legislation to check it.

Train v. City of New York, 1975

The most famous court ruling came out of the Clean Water Act fight. The city of New York sued, saying it was entitled to its share of the water money that had been withheld. The case was named for the EPA Administrator, Russell Train, who by then held the job. On February 18, 1975, the Supreme Court decided Train v. City of New York and ruled for the city.

Pay attention to what the Court did and did not decide. It ruled on the language of the statute: the Clean Water Act said the Administrator should allot the full amounts, and it gave him no authority to hold back part of them. The Court did not decide the large constitutional question of whether a president has inherent power to impound. It did say, in effect, that the president must follow the law Congress wrote. That narrower holding is the reason the question has never been fully settled in the abstract, and why the statute matters so much.

The Impoundment Control Act of 1974

While the Nixon cases were still in the lower courts, Congress acted. The Congressional Budget and Impoundment Control Act of 1974 was signed on July 12, 1974, by Nixon himself, weeks before his resignation on August 9, 1974. Title X of that law is the Impoundment Control Act, and it is still the law. The Act did two big things.

First, it created the modern congressional budget process, including the budget committees and the Congressional Budget Office. Congress built its own scorekeeper, so it no longer had to depend on the president's numbers.

Second, it set the rules for when a president may hold back money. It created two categories.

1. Rescission. If the president wants to cancel spending permanently, he sends Congress a special message proposing a rescission. He may withhold the funds for up to 45 days of continuous session while Congress considers it. If Congress does not pass a rescission bill within that period, the president must release the money. In other words, the default is that the money gets spent, unless both houses agree to cancel it.
2. Deferral. If the president wants only to delay spending, he must also report it to Congress. The original Act let either house pass a resolution to disapprove a deferral. The Supreme Court's 1983 decision in INS v. Chadha struck down that kind of one-house veto, and later courts, including the D.C. Circuit in 1987, narrowed deferrals to routine management reasons rather than policy disagreement with Congress.

The Act also gave a job to the Comptroller General, who heads the Government Accountability Office, the GAO. The GAO reviews the president's messages, and it may report whether a withholding is legal. If the Comptroller General believes funds are being illegally withheld, the Act lets the GAO go to court to force their release, after giving notice.

How it has worked since

Presidents of both parties have tested the edges. Some have used the rescission process to propose cuts, with mixed results. In 1996, Congress tried to give the president a stronger tool, the Line Item Veto Act, which let him cancel individual spending items. In Clinton v. City of New York (1998), the Supreme Court struck it down, six to three, on the ground that it let the president amend statutes in a way the Constitution does not allow. That ruling is a reminder that the way to give a president real power over spending is not to give him a pen, but to pass a constitutional amendment or write the discretion into each appropriations bill.

The GAO has issued decisions over the years that find particular withholdings in violation of the Act. One of the best known came in January 2020, when the GAO concluded that the Office of Management and Budget had violated the Act by holding up certain security assistance funds. The GAO is a legislative branch agency, and its conclusions are not binding on the executive. They carry weight because Congress can use them in the budget process.

A newer wrinkle is the "pocket rescission": a president sends a rescission request late in the fiscal year so that the 45-day clock runs past the end of the year and the funds expire. Supporters call it a legitimate use of the statute. Opponents say it defeats the point. Rather than take sides, I will tell you where to look. The text of the Act and the GAO's decisions are public, and the Court has not given a definitive answer.

A worked example: "up to" versus "shall"

Because so much turns on the wording of an appropriation, let me show you how a reader sorts them. These are hypotheticals, not real programs.

Hypothetical one. A spending bill says: "There is appropriated up to $400 million for the repair of federal courthouses." The agency finds that the repairs can be done for $350 million. The $50 million it did not need stays in the Treasury. Nobody has been cheated, and no one calls it impoundment. The word "up to" sets a ceiling and leaves room for judgment.

Hypothetical two. A bill says: "There is appropriated $400 million, which the Secretary shall allot to the states in proportion to population for the repair of courthouses." Now suppose the Secretary decides to send out only $200 million because the president thinks courthouses are a state job. That is the Nixon fact pattern. The statute leaves no room for discretion, and the withholding is a refusal to carry out the law.

Hypothetical three. A third bill funds a program but says nothing either way, and the money is available for two years. The president does not spend it in year one, and Congress assumes it will go out in year two. Here a delay can be ordinary management. If the year-two deadline passes and the money expires unspent, the question becomes why, and the GAO may look at it.

Those three cases explain most of what you read in the headlines. Ask first what the words say, then ask whether the agency's explanation is about managing the program or about disliking the policy. The first is routine and the second is the thing the 1974 law was written to stop. For a broader method of reading any federal statute with the same care, try A Five-Question Constitutional Test You Can Run on Any Federal Law.

The conservative case for a strong executive hand, and its limit

Here is the strongest version of the argument that presidents should have more room. It runs in three steps.

1. Congress spends too much. A president who can say no to waste is a check on a legislature that rarely says no to anything.
2. Executive power is vested in the president. The president is responsible for running the government, and running it involves judgment about how and when money is spent.
3. Appropriations are ceilings, not commands. Many spending laws say an agency may spend up to a number. A president who spends less is acting within the law.

Step three is the strongest, and it is often right. When the law says "up to," the president has room. When the law says "shall," as the Clean Water Act did, he does not. Steps one and two prove less than they claim. Waste is a real problem, but the Constitution answers it by giving the power of the purse to Congress, not by letting a president rewrite spending through inaction. If a president can decline to spend what he dislikes, a future president can decline to spend what he dislikes, and the policy of the country is whatever the current occupant of the office wants, regardless of what the voters' representatives passed. Conservatives who want rules that bind other people's presidents should want them to bind their own.

The better route for a reform-minded president is the one the 1974 law builds in: send Congress a rescission request, make the case in public, and win the votes. That is slower and harder, and that is the point. I make the broader case for who makes the laws in Congress Should Write the Laws, and Other Radical Ideas From Article I, and I compare the other great fight over presidential control of the government in Who Can Fire the Regulators? A Timeline From Myers to Seila Law.

The bottom line

• Congress appropriates; the president executes. The Appropriations Clause and the Take Care Clause point the same direction: spending is made by law, and laws are to be carried out.
• The 1974 Act is the rulebook. A president may propose a rescission, which Congress must approve within 45 days of continuous session, or the money must be spent. Read the Act on Congress.gov.
• "Up to" is not "shall." Before you decide whether a withholding is lawful, read the appropriation. Many are ceilings.
• Watch the GAO. Its decisions are public. When it says money was illegally held back, that is a signal worth reading, whichever party holds the White House.
• Want real savings? Pass them. Send your representatives the message that cuts should come through the rescission process and the appropriations bills, in the open, with votes recorded. See also the bills page.