B-107689, APR 29, 1952

B-107689, APR 29, 1952

PRECIS-UNAVAILABLE

CLARENCE CANNON, UNITED STATES HOUSE OF REPRESENTATIVES:

I HAVE YOUR LETTER OF APRIL 25, 1952, REQUESTING MY VIEW ON THE EFFECT OF THE SMITH-COUDERT AMENDMENT LIMITING EXPENDITURES FOR THE DEFENSE DEPARTMENT DURING THE FISCAL YEAR 1953.

SEC. 638 OF H.R. 7391, THE DEPARTMENT OF DEFENSE APPROPRIATION ACT, 1953, AS PASSED BY THE HOUSE OF REPRESENTATIVES, PROVIDES AS FOLLOWS: "MONEY APPROPRIATED IN TITLES II, III, IV AND V OF THIS ACT SHALL BE AVAILABLE FOR EXPENDITURE IN THE FISCAL YEAR ENDING JUNE 30, 1953, ONLY TO THE EXTENT THAT EXPENDITURES THEREOF SHALL NOT RESULT IN TOTAL AGGREGATE NET EXPENDITURES OF ALL AGENCIES PROVIDED FOR HEREIN BEYOND THE TOTAL OF $46,000,000,000."

A PROPOSAL SIMILAR TO THAT OF SECTION 638 WAS ORIGINALLY A PART OF S. CON. RES. 6, 80TH CONGRESS, FIRST SESSION, TO INCLUDE ALL GENERAL APPROPRIATION BILLS IN ONE CONSOLIDATED GENERAL APPROPRIATION BILL. ORIGINALLY INTRODUCED, THE CONCURRENT RESOLUTION WOULD HAVE REQUIRED THE CONSOLIDATED APPROPRIATION BILL TO SHOW FOR EACH ITEM OF APPROPRIATION THE AMOUNT TO BE EXPENDED IN THE ENSUING FISCAL YEAR FROM SUCH APPROPRIATION AND FROM ALL OTHER APPROPRIATIONS MADE IN PRIOR YEARS FOR THE SAME PURPOSE, WITH A TOTAL LIMITATION ON THE AMOUNT TO BE EXPENDED FROM THE APPROPRIATIONS IN THE BILL AND FROM PRIOR-YEAR APPROPRIATIONS. AFTER HEARING TESTIMONY FROM REPRESENTATIVES OF THE TREASURY DEPARTMENT, BUREAU OF THE BUDGET, AND GENERAL ACCOUNTING OFFICE TO THE EFFECT THAT EXISTING FEDERAL BOOKKEEPING AND ACCOUNTING PROCEDURES WERE NOT ADAPTABLE TO A DUAL CONTROL OF EXPENDITURES AND OBLIGATIONS ON THE BASIS OF CASH WITHDRAWALS FROM THE TREASURY WITHOUT CONSIDERABLE DIFFICULTY AND SUBSTANTIAL ADDITIONAL EXPENSE TO THE GOVERNMENT, THE RESOLUTION WAS REDRAFTED BY ITS SPONSORS AND REPORTED OUT BY THE SENATE COMMITTEE ON RULES AND ADMINISTRATION WITHOUT THE EXPENDITURE LIMITATION. THE SAME REASONING WHICH LED TO THE ABANDONMENT OF THE EFFORT TO APPLY EXPENDITURE LIMITATIONS ON TOP OF OBLIGATION LIMITATIONS IN S. CON. RES. 6 APPLIES WITH EQUAL FORCE TO THE EXPENDITURE LIMITATION IN SECTION 638 OF THIS BILL.

AS I STATED IN MY TESTIMONY OF SEPTEMBER 26, 1951, BEFORE THE JOINT COMMITTEE ON REDUCTION OF NONESSENTIAL FEDERAL EXPENDITURES, CONGRESS OF THE UNITED STATES, I DO NOT WISH TO DISCOURAGE ANY EXAMINATION THE CONGRESS WISHES TO MAKE WITH A VIEW TO DETERMINING THE NECESSITY OR THE SIZE OF INDIVIDUAL PROGRAMS OR SEGMENTS OF EXPENDITURES. INDEED, I WOULD WELCOME AN ORDERLY AND OBJECTIVE RE-EXAMINATION OF EXISTING PROGRAMS. HOWEVER, AS TO EXPENDITURES UNDER PRIOR-YEAR APPROPRIATIONS AND AUTHORIZATIONS, THE CONGRESS HAS ALREADY EXERCISED ITS CONTROL AT THE TIME THE APPROPRIATIONS WERE MADE.

THE GENERAL ACCOUNTING OFFICE IS FULLY COGNIZANT OF THE DANGERS IN DEFICIT SPENDING AND HAS ADVOCATED GENERALLY THE GOVERNMENT'S OPERATION ON A BALANCED BUDGET AND THE MAINTENANCE OF UTMOST ECONOMY AND EFFICIENCY IN THE PERFORMANCE OF GOVERNMENTAL FUNCTIONS. IT IS RECOGNIZED THAT THE APPARENT PURPOSE SOUGHT TO BE ACCOMPLISHED BY SECTION 638 - LIMITATION OF EXPENDITURES TO A PREDETERMINED FIGURE NOTWITHSTANDING THE AMOUNT OF APPROPRIATIONS PREVIOUSLY AND PRESENTLY MADE BY THE CONGRESS AUTHORIZING THE OBLIGATION OF PUBLIC FUNDS - IS A MATTER PECULIARLY WITHIN THE PROVINCE OF THE CONGRESS TO DECIDE. HOWEVER, I BELIEVE THE DIFFICULTIES AND PITFALLS IN THE WAY OF ACCOMPLISHING THIS PURPOSE SHOULD BE BROUGHT TO THE ATTENTION OF THE COMMITTEE AND THE CONGRESS.

A NUMBER OF QUESTIONS ARISE AS TO WHAT AMOUNTS GO TO MAKE UP "TOTAL AGGREAGE NET EXPENDITURES." AMONG THESE QUESTIONS ARE THE FOLLOWING:

(1) ARE ADVANCES OF CASH TO CONTRACTORS IN 1952 FOR MATERIALS TO BE DELIVERED IN 1953 A PART OF THE $46,000,000,000 LIMITATION?

(2) ARE PAYMENTS MADE DURING 1953 FROM LAPSED APPROPRIATIONS AND APPROPRIATIONS FOR JUDGMENTS A PART OF THE $46,000,000,000 LIMITATION?

(3) ARE PAYMENTS MADE DURING 1953, FOR ADMINISTRATIVE EXPENSES, FROM COUNTERPART FUNDS A PART OF THE $46,000,000,000 LIMITATION?

(4) WHO WILL ADMINISTER THE DISBURSEMENT LIMITATION OF $46,000,000,000? I HAVE ASSUMED THAT IF THE LIMITATION APPLIES ONLY TO THE DEPARTMENT OF DEFENSE THAT IT WILL BE ADMINISTERED BY THE SECRETARY OF DEFENSE.

IN THE LIMITED TIME AVAILABLE I CANNOT GIVE AN OPINION ON THESE QUESTIONS. FOR THE PURPOSES OF THIS REPLY, I AM ASSUMING THAT THE PURPOSE OF THE AMENDMENT IS TO LIMIT THE TOTAL AMOUNT OF CHECKS TO BE DRAWN AGAINST THE TREASURER OF THE UNITED STATES, PLUS CASH DISBURSEMENTS BY DISBURSING OFFICERS, TO $46,000,000,000 DURING THE FISCAL YEAR 1953 FOR THE ACTIVITIES COVERED BY THE AMENDMENT.

IN THE CASE OF SECTION 638, IN PRIOR YEARS THE CONGRESS HAS MADE APPROPRIATIONS AND AUTHORIZED THE DEFENSE DEPARTMENT TO ENTER INTO CONTRACTS FOR MATERIALS AND SERVICES. THIS WAS THE POINT AT WHICH THE CONGRESS EXERCISED ITS CONTROL. ACCORDING TO TESTIMONY BEFORE THE APPROPRIATIONS COMMITTEE, A GOOD PERCENTAGE OF THESE GOODS AND SERVICES WILL BE DELIVERED DURING FISCAL YEAR 1953. ALSO, THE APPROPRIATIONS PROVIDED IN THIS BILL WILL BE OBLIGATED FOR GOODS AND SERVICES, A PORTION OF WHICH WILL NECESSARILY BE DELIVERED DURING THAT FISCAL YEAR. IF THE GOODS AND SERVICES ARE DELIVERED AND ACCEPTED BY THE GOVERNMENT, THERE CAN BE NO NET SAVING AS A RESULT OF THIS AMENDMENT. THE GOODS AND SERVICES MUST BE PAID FOR EITHER DURING 1953 OR SOME SUBSEQUENT FISCAL YEAR. HAVE REPEATEDLY URGED ON THE CONGRESS THAT THE WAY TO REDUCE EXPENDITURES, AND THE ONLY WAY, IS TO REDUCE APPROPRIATIONS. THIS AMENDMENT DOES NOT REDUCE EXPENDITURES; IT ONLY POSTPONES THE DAY WHEN PAYMENT MUST BE MADE.

AS TO THE EFFECT OF THE AMENDMENT ON FEDERAL ACCOUNTING OPERATIONS, IF THE INTENT OF THE AMENDMENT IS TO BE CARRIED OUT, THE AGENCIES AFFECTED MUST ESTABLISH AT THE POINT WHERE OBLIGATIONS ARE INCURRED:

(1) A CONTROL OVER OBLIGATIONS INCURRED UNDER CURRENT APPROPRIATION AUTHORITY.

(2) A CONTROL OVER CASH PAYMENTS MADE AS A RESULT OF PRIOR AND CURRENT YEAR OBLIGATIONS.

(3) A CONTROL AS TO THE TIME GOODS OR SERVICES ARE TO BE DELIVERED IN A GIVEN FISCAL YEAR.

INSTITUTION OF THE TWO ADDITIONAL CONTROLS REQUIRED WOULD AT LEAST DOUBLE PRESENT APPROPRIATION ACCOUNTING COSTS.

ASSUMING THAT THE PURPOSE OF THE AMENDMENT IS AS I HAVE SET OUT IN THE SIXTH PARAGRAPH OF THIS LETTER, I CAN SEE NO ULTIMATE SAVINGS WHICH WOULD JUSTIFY THE INCREASED ADMINISTRATIVE COSTS IF THE AMENDMENT IS ADOPTED.

ONE OTHER POINT OF EXTREME SIGNIFICANCE AND IMPORTANCE SHOULD BE BROUGHT TO YOUR ATTENTION. THE AMENDMENT WOULD HAVE THE EFFECT OF TRANSFERRING TO THE SECRETARY OF DEFENSE, OR TO THE PRESIDENT IF THE AMENDMENT WERE APPLIED GOVERNMENT-WIDE, AUTHORITIES WHICH ARE USUALLY EXERCISED BY THE CONGRESS. FOR EXAMPLE, IN THE MILITARY, THE AMENDMENT WOULD HAVE THE EFFECT OF GRANTING TO THE SECRETARY OF DEFENSE AN APPROPRIATION OF $46,000,000,000 FOR DISBURSEMENT. THE SEPARATE APPROPRIATIONS MADE TO THE DEPARTMENTS OF ARMY, NAVY AND AIR FORCE WOULD BECOME, IN EFFECT, LIMITATIONS ON AMOUNTS TO BE OBLIGATED. THE SECRETARY OF DEFENSE, IF HE SO DESIRED, COULD REDUCE DISBURSEMENTS IN ONE DEPARTMENT BY ALLOCATING THE GREATER PORTION OF THE $46,000,000,000 TO THE OTHER TWO. UNDER SUCH PROCEDURE THE SECRETARY OF DEFENSE, OR THE PRESIDENT IN THE CASE OF A GOVERNMENT-WIDE EXPENDITURE LIMITATION, COULD CARRY OUT A PROGRAM OF DISBURSEMENTS WHICH WOULD VARY SUBSTANTIALLY FROM THE PROGRAM ESTABLISHED BY THE CONGRESS THROUGH ITS APPROPRIATIONS.

I HAVE NOT EXPRESSED AN OPINION AS TO THE EFFECT OF THE CHANGES REQUIRED IN FEDERAL BUDGETARY PROCEDURES SINCE I FEEL THAT THE DIRECTOR OF THE BUREAU OF THE BUDGET IS BETTER QUALIFIED TO SPEAK ON THIS PHASE OF THE PROBLEM.

A COPY OF THIS LETTER IS BEING SENT TO THE CHAIRMAN, COMMITTEE ON APPROPRIATIONS, UNITED STATES SENATE.