US Government Debt Different - Finance Department - University of ...

Michael W. McConnellAlthough the Constitution is explicit that the executive may notspend without congressional appropriation, it is less explicit aboutwhether the executive can decline to spend funds that have been appropriated.For most of the nation’s history, appropriations statuteswere understood as more of a ceiling than a floor. For example, ifCongress appropriated a certain sum for building a highway and thehighway could be built for less, the executive returned the excess tothe Treasury unspent. This discretion not to spend the entire appropriatedsum is called “impoundment.” Thomas Jefferson, for example,famously refused to spend money Congress appropriated forthe purchase of gunboats on the ground that the Louisiana purchasemade them unnecessary for their intended purpose of protecting accessto the Mississippi. After Richard Nixon used impoundment authorityabusively as a policy tool, Congress passed the ImpoundmentControl Act of 1974, which stripped the executive of this power, exceptwith specific congressional acquiescence. As a technical matter,the President’s legal obligation to spend all appropriated funds is bestunderstood as a statutory duty rather than a constitutional mandate.If a President were to spend less than the appropriated amounts,he would be in violation of the Impoundment Control Act, not ofthe Constitution. That could be significant in a budgetary pinch,because the President’s obligation to comply with the Constitutiontakes precedence over his obligation to comply with statutes.47BorrowingThe borrowing power had yet a different history. Prior to the GloriousRevolution of 1688, the King had unfettered legal authority toborrow funds, and often did so. But the loans were in effect personalto the king; Parliament was under no obligation to pay them back.Kings were notoriously unreliable creditors, and could borrow onlyat exorbitant rates of interest. Charles II, for example, could borrowmoney on the Amsterdam markets at about a 15% annual rate, whilecreditworthy private borrowers could obtain loans for a fraction ofthat. As part of the constitutional settlement of the Glorious Revolution,Parliament voted to curb the power of the King to borrow. Thishad the unintended effect of making the public debt backed by thefull faith and credit of the nation, because borrowing was now autho-