Lawfare Daily: Pocket Rescissions in Congress

[Intro]

Zach Price: If you read the statute to create a just totally open-ended power to cancel whatever money they can keep in play at the end of the fiscal year. There's no standard in the statute that would guide how you exercise that power so it'd be a sort of limitless delegation with respect to canceling money.

Molly Reynolds: It's the Lawfare Podcast. I'm Molly Reynolds, contributing editor at Lawfare and Senior Fellow at Brookings with Zach Price, associate professor of law at UC Law San Francisco, and Phil Wallach, senior fellow at the American Enterprise Institute.

Phil Wallach: Really for Congress to be the coequal or or senior policy maker, we can't have a system in which the executive just gets to cancel what they do, and that's pocket rescissions is, is a, is a way of doing that.

Molly Reynolds: Today we're talking about pocket rescissions, their legality and what they could mean for Congress's power.

[Main Podcast]

So let's start off by discussing what a pocket rescission is, and how pocket rescissions relate to what we might call regular presidentially, initiated rescissions that are provided for under the Congressional Budget and Impoundment Control Act. Phil, do you wanna start off by helping our listeners understand what it is that we're talking about here?

Phil Wallach: Sure. So before 1974 there was no formal mechanism for the president to take something, some money that was legally obligated for spending and, and not spend it anymore. Surely that happened with some regularity, but it would've been on a less formal basis.

And then of course, Richard Nixon made some very aggressive uses of what he called impoundment. And he said, I can just impound funds and not spend them because I do not like these spending lines. I do not like these programs. I think they're bad uses of the taxpayers money. So Congress passed the Impoundment Control Act. But that was not merely intended to constrain the president's aggressive impoundments. It was also meant to give a more regularized and reliable mechanism to stop funds from going out and that's rescissions.

So rescissions are in, you know, this one section of the Impoundment Control Act. It's Section 1012 of the original law, or 2 U.S.C. 683, and it, it says that the president can make requests to Congress and they have to take a very particular form. And then the law also prescribed in another section the particular procedures that the House and the Senate should use to consider such requests. And so the way they work is the, they, they give 45 days for, these chambers to, to react to the request and if in that time they affirm the request, then the money is rescinded. And if in that time they do not affirm the request, then it, it essentially, the request fails and the president is obligated to spend.

So that's a regular rescission. We saw use of that for the first time in a little while, this past summer, in a $9 billion package. And you can think that that's good policy or bad policy, but everybody pretty much agrees that that's what the law, is, is set up to do.

Now, a pocket rescission works differently and it sort of changes the burden of action. The pocket rescission only works where funds have an expiration date, and what it essentially is, is the executive branch jamming its rescission request up against that expiration date such that it says we've got this 45 day window during which the, the act allows us to sort of put this money in limbo. And we're gonna make that 45 day window overlap with the expiration date.

So in the absence of congressional action, this money's gonna go into limbo, limbo, limbo expire, and then it's going to have to be sent back to the Treasury because it's expired. And that's what happens to expired funds. So in this way, you essentially make an impoundment. That's, that's what it amounts to. You essentially say, we're not going to spend this money and we're gonna do it by exploiting this particular weird combination of, of waiting and waiting and waiting, and then making the rescission request to time it in just this way.

Molly Reynolds: Thanks, Phil. Zach, anything to add on sort of just like table stakes here in terms of understanding what a pocket rescission is?

Zach Price: I think it's a good overview. I mean, to get into the technical legal details a little bit more, and then we can talk about the arguments for why it is or isn't valid. I, I, I think it's not the best read in the statute, but I mean this, the statute allows those rescission proposals as Phil was describing. It also defines a second category of impoundments, which are called deferrals, which mean delays in spending rather than outright cancellations.

So rescissions can't be done without new legislation, but it sets up a process for proposing, a rescission. And then deferrals can't be made beyond the end of the fiscal year and can only be done for certain reasons that basically align with the purposes for the spending. But then in the rescission provision, the statute says that funds must be made available for obligation and unless Congress enacts the rescission proposal within those 45 days.

And then the deferral provision, as I was saying, it normally limits deferrals and says they can't extend beyond the end of fiscal year, but it carves out funds covered by a rescission proposal, so they sort of fall outside the usual deferral standards, and that's what would normally let you defer spending while Congress considers the legislation for 45 days.

Molly Reynolds: So Zach, as you sort of suggested, there is a reading of the statute and also I think some constitutional arguments for why pocket rescissions are actually unlawful. There's also a sort of historical question. Whether this is something that has happened before. Can you lay out for listeners kind of the, the argument for why the executive branch should not be able to attempt to cancel funds in this way?

Zach Price: Sure. And I should say there's going to be a letter from me and some other appropriation scholars to Congress that makes this point, but the administration's view, I think is that, you know the, you make a rescission proposal, you just automatically get a 45 day deferral, and if the budget authority expires in that time, that's just the way it is. The text doesn't actually really say that what it says, as I was saying earlier, is that you have to make the funds available for obligation unless Congress approves a rescission proposal within the 45 days.

So the emphasis is on making the funding available, not on ensuring that it can be delayed. And you might say, if Congress can't enact the rescission proposal because the funds have expired, then you can't satisfy that clause and the funds have to be made available.

But beyond that, I mean, it's probably true the text doesn't squarely address this issue. But to the extent there's ambiguity, if you think about the overall purpose and structure of the statute, it's manifestly designed to limit impoundments, not to give the president a kind of freestanding authority to cancel funds. And what's more is Phil pointed out in a great post on Lawfare, there's a kind of slight of hand here because the only way to be in a position to make a meaningful pocket rescission is to deferred funding over the course of the fiscal year. And the deferral limitations are meant to prevent that as well.

So I think it's really at odds with the design and the statute to understand it, to create this sort of general power to cancel money at the end of the fiscal year. And then even beyond those points about the statute, you'd have some constitutional questions about the scope of power that's being delegated to the president if you read the statute that way.

Molly Reynolds: So Phil, in the recent piece for Lawfare that Zach just alluded to that you wrote, you actually argued that sort of as Zach was intimating, that there is a reading of the statute that, you know, could technically make this behavior permissible. Can you sort of outline that reading of the law that says that maybe the executive branch actually can do what they're saying?

Like what is the argument that maybe to put it differently, like what is the argument that Russ Vought, the OMB director and others in the administration who are pushing this strategy? Like what is the legal argument that they are making contrary to what Zach has just outlined.

Phil Wallach: Yeah, it's a, I'll try to lay out their position as, as sympathetically as I can.

And, and I, I, yeah, I have to admit that I found their arguments a little stronger than I was expecting or hoping, because ultimately I'm a, I would root for the court to follow Zach's interpretation. But, but I, I have to say that, that OMB has some points. First is that the Section 1012 rescission doesn't have any clear language sort of stopping it from bumping up against the end of funding eligibility whereas section 1013 about dis deferrals does have that language. So in that way it, it's, it's not, it's not, it seems as if the drafters left this flexibility for rescissions to get used all the way up until the end, of an obligation period, like a fiscal year.

The other strong part of the OMB case is that they point to some examples from the Ford and Carter administrations where rescissions did happen at the end of these fiscal years, and there was kind of some, some consternation at the time, but they went through and didn't cause any, any real constitutional ruptures or anything. And GAO at the time basically put up a flag and said, hey, this looks like kind of a bad feature of this statute Congress. You should probably fix it. And Congress went ahead and never did anything about it.

So the OMB position that, that this is sort of an available usage of the statute, is somewhat plausible if you wanna read it as well this is a loophole that basically comes from poor drafting of the deferral and rescission sections in combination with each other. It has never really been exploited for any mischief up until now. But they are willing to use it in ways, you know, that, that, that clearly are making a lot of people in Congress uncomfortable or upset now, without, without worrying about any bruised feelings.

So that, that's where, that's where we are. I, I, I think they do have these, a couple of these strong points on their side. I agree with Zachary one hundred percent in the end, if you're willing to give any credence to the legislative intent of the Impoundment Control Act, it was about stopping impoundments and it would be bizarre to read it as creating a pathway to do impoundments at will. So in that sense, I would agree that the statute shouldn't be read in this way, but it would be easy to fix on the other hand.

Molly Reynolds: We'll get to that Phil. Zach, anything you wanna, respond to any of the points that Phil has made?

Zach Price: Sure. I could just offer brief counterarguments to both the, both those points just to flesh out the positions. I mean, I think it's true that the deferral provision refers to the end of the fiscal year and the rescission provision doesn't, but that could just be a function of their different functions. I mean, the deferral provision is designed to limit deferrals while allowing them, and the rescission proposal is designed to prevent rescissions altogether without new legislation. So it's a little at odds with that to then read the rescission provision as giving this this kind of impoundment power when even the deferral provision doesn't do that.

There's also a kind of savings clause in the first section of the statute that says the act should not be read to supersede any provision of law, which requires the obligation of budget, authority, or the making of outweighs there under. So that seems, again, to push in the direction of, making sure that funds are available for obligation rather than doing the opposite.

And then in terms of past practice, I think if anything, the practice cuts against the pocket rescission power. You guys had another good post digging into the details of some of the, the historical examples that the administration has pointed to. And really the best one for them is that one Phil was mentioning. It's from 1975, I believe so, right when the statute is new and the administration proposed a rescission near, near the end of the fiscal year, and then GAO said afterwards that that resulted in the funds expiring. So that's what they're pointing to.

But it turns out, there are a couple things about that. One is that they didn't actually propose the rescission within 45 days of the end of the fiscal year. There had been some, the, the, the time period actually works based on Congress being in continuous session and there've been some recesses that extended the period.

What's more, the administration denied that it had any intent to achieve a rescission through this mechanism. So it wasn't asserting the theory the administration is claiming now. And then Congress afterwards, it actually extended the budget authority to undo the impoundment.

So in a way that course of deal and suggest a repudiation of the practice and then you don't really see it. It, it's certainly not the case. It's become a kind of accepted feature of the budget process. You know, if we had a kind of systematic, entrenched practice of, of engaging in this type of rescission, then I think it would be fair to say, well, the Trump administration should get to do it too, if, unless the statute really squarely repudiates it, but that's not the case at all. I think if anything, the practice has repudiated this understanding and from that point of view, I think that should cut against the administration's position.

Phil Wallach: I would just add, from a constitutional perspective, you know, this is a very clear offense against bicameralism and presentment that have been time and again in the intervening decades affirmed as crucial to, to changing the law. Right so, you know, the, the practical effect of this. Is to alter the law. And I guess the administration's position is something like, oh, we won't be altering the law, we'll just be not spending the money. Which is pretty, a little too cute for my taste.

But, yeah, this is basically a way of, of getting around the necessity of having Congress be the one to fix statutory requirements. And, and that's certainly something that the court has ruled against time and again.

Zach Price: You know, there's this, the delegation argument I alluded to earlier. I, I mean, the current doctrine, the Supreme Court just reaffirmed this year is that Congress can delegate a kind of lawmaking authority to the executive branch, but has to provide an intelligible principle to guide what the delegee is doing, and that's pretty flexible.

But if you read the statute to create a just totally open-ended power to cancel whatever money they can keep in play at the end of the fiscal year, there's no standard in the statute that would guide how you exercise that power. So it'd be a sort of limitless delegation with respect to canceling money and that that sort of seems like the sort of thing that violates the intelligible principle test, or at least would lead a court to wanna read the statute more narrowly so as to provide more constraints on what the executive is doing.

Molly Reynolds: We will, we'll link to both Phil's piece on pocket recisions and the piece that Zach mentioned from some folks at Protect Democracy on the kind of historical precedent to which the folks at OMB are pointing, in our show notes.

But I wanna sort of build on kind of where Phil was going and to say that the questions that are raised here, by the executive branch's behavior aren't just legal ones. Phil, one of the things that you talk about in your, in your piece, is about why pocket rescissions are a problem institutionally for Congress, even if they might be technically legal. Can you sort of flesh this part of the argument out for listeners?

Phil Wallach: Well, of course they're problematic for all the same reasons as impoundment was, was problematic and that they passed the Impoundment Control Act in the first place, which is that this is basically the executive branch declaring itself the senior partner in determining what actually gets dispersed by the U.S. Treasury in, in all of the objectives of, of the American people, right. It's basically, you know, saying if, if any numerical spending obligation is defined, that's just up to a ceiling and can never be any kind of binding command on the executive, because ultimately dispersing money is an administrative function and we in the executive branch are the ones executing and so it's up to us in the end.

You know, I, I, I think we have to admit that there's a certain amount of messiness in the world of government spending, right? It, it doesn't all work out quite so tidily and, and there's a certain normal amount of money that expires and gets rescinded. That's just something that happens for nerds like Zachary who know about this stuff, it's just a familiar feature of the process.

But to go from that to saying that, well actually, the executive branch can just spend 0% of something on a program it doesn't like, and well just like it didn't spend a little bit on some other programs, it spent none of the money on this and therefore it gets to send it back that it, it really completely disrupts the constitutional balance. And yeah, it, it just, it sort of makes it hard to understand what Congress is even doing in the, in the spending debates that it has.

So really for Congress to be the coequal or or senior policy maker, we can't have a system in which the executive just gets to cancel what they do. And that's pocket rescissions is, is a, is a way of doing that. And of course we don't really know the scale at which this administration could or might try to use this tool. And so it's, it's sort of possible that it might be modest enough for folks in Congress to try to shrug it off rather than take it as a real constitutional threat.

But I think, you know, letting the camel's nose into the tent would be a, a real mistake because they, if they would allow this to go forward without doing anything about it, they would be creating a a, a precedent by which the executive could pretty much cancel Congress's spending choices.

Molly Reynolds: Zach, anything to add on this question of sort of the way in which this is a challenge to Congress's power institutionally?

Zach Price: Yeah. I guess one point is also, it, it, I mean, you both know this world better than I do, but it, it could also have effects on the, the bargaining process because a big feature of appropriations is a kind of log rolling and you know, that has ugly features, but I think is generally a virtue. It's a way to kind of ensure there's broad buy-in, in terms of what the government is doing.

But the problem with something like a pocket rescission and other kind of unilateral executive tools, I think there's a problem with sort of the power to not, not enforce laws in the way the president's claiming as well is that it, it, it disrupts that balance 'cause you agree to some overall package that you can live with, and then you find out that the president's just zeroed out the parts that you like.

So maybe now, next time you're not gonna go along, you're gonna try and demand some stronger guarantee and maybe that's gonna work okay? When you have unified control of government. But once you start getting to issue, have divided government or have majorities, you can't hold together, then you really need that wall growing to get, get things done. And this, this could make that a lot harder.

Molly Reynolds: Yeah, I think that's right. And it's an argument that, I've been making about both this specific practice or potential practice of pocket decisions, and also honestly, about even regular rescissions that are proceeding under the terms of the Impoundment Control Act.

So there's no real question that, you know, what Republicans in Congress did when they took up the special message transmitted by the president to cancel about $9 billion in foreign assistance and public broadcasting funds. They followed the terms of the, the law in passing, that rescissions package.

But because those regular rescissions can move through the Senate at a 51 vote threshold, we are sort of teetering on this world where Congress passes spending bills on the front end at a 60-vote threshold, but then they can be undone kind of piece by piece depending on the appetite for doing so at a 51 vote threshold. So there's a sort of looming, possible asymmetry that I do think stands to destabilize the process. Yeah, Phil.

Phil Wallach: I've just cut in there to say we shouldn't lose sight of how strange the fiscal year cycle has been right. We're operating under a full year continuing resolution. Like to the extent we say Congress agreed on spending levels for fiscal year 25.

It, it's true they passed a law that set the levels, but the way it did that was by continuing the levels from fiscal year 24, with just, you know, pretty modest alterations really that in itself represents a failure of the congressional appropriations process, and so for me to come in with this $9 billion worth of rescissions after that continuing resolution, yeah, it, it, it definitely is a, a, a kind of departure from the bargain maybe that Democrats thought that they had struck in, in, in March or April or whatever it was.

But $9 billion is not a lot in the, in the overall federal budget. Of course, we shouldn't lose sight of that. You know? We have to not let ourselves, I think be too, too troubled by majorities in, in two chambers of Congress working their will.

And, and of course there was an actually an interesting negotiation process that led to the final bill, right? It wasn't, it wasn't in the end exactly what the president asked for that got passed. So, yeah, I, I agree that if you went wild with regular rescissions, they could also significantly destabilize a healthy appropriations process.

Unfortunately, we don't have a healthy appropriations process just now. Maybe, maybe Senate Majority Leader Thune is, is gonna lead us back to one. We can all hope. But yeah, I think you have to have a sense of proportion also. You know, a little, a little bit is different than a lot.

Molly Reynolds: So that's a fair point from Phil where it also, helps us sort of, introduce where I wanna go next, which is that we need to put this question of pocket rescissions, not just in the broader context of the congressional appropriations process, but also in the broader context of the strategy that OMB is pursuing to shape how federal funds are spent. Zach, how do you see this issue of pocket rescissions fitting into the administration's broader strategic puzzle in terms of trying to control what happens with federal spending?

Zach Price: Sure. So I have an essay together with Matt Lawrence and Eloise Pasachoff in The Georgetown online where we called this Appropriations Presidentialism and basically the administration is, is asserting stronger executive control over spending, over basic, along basically every dimension it can find, from kind of conditions on grants, to deferring money, canceling spending. And so you're seeing really kind of full bore across the board push to get stronger unilateral executive control over spending.

And I think it is significant because Congress's power of the purse is a central congressional authority, but it's also been really important to checks and balances. I think particularly in the modern era where the executive branch has a lot of authority in general. Presidents often have a lot of power to make policy using statutory delegations or claim constitutional authorities, and Congress is often reacting or imposing limits and constraints through the appropriations process.

It also has that log rolling function we were talking about earlier where you kind of get buy into what the government's doing by satisfying various constituencies. And so making this more unilateral executive function, I think could be a big change in how separation of powers works. You know, it builds on a longstanding trend kind of in the direction of executive governance, but it would give us even more of this dynamic of sort of flip flopping from one administration to the next in terms of pretty fundamental aspects of, of government policy.

Phil Wallach: You know, OMB Director Vought was quoted a few weeks ago saying, we really need to make the appropriations process less bipartisan, right? That's he's just very open about, about his vision, which is that he doesn't like what appropriators have done in these last many decades, and he wishes that spending decisions got made differently in a way that gave them less influence and more influence in the White House.

And it's not at all clear how he thinks that would go in a democratic administration. It, it, that appears not to trouble him very much, to be honest. But yeah he, he, he's quite, quite open in his contempt for the way things have been.

Molly Reynolds: Yeah, and I'll just note that sort of one specific example of where we're seeing this question of pocket rescission sort of relate to other things that the administration is doing in this space, which is that, the, administration recently made an emergency application to the Supreme Court in a different lawsuit involving, the cancellation of, federal spending for a number of organizations connected to USAID where, one of the things that they said as part of their argument for why the Supreme Court needed to act expeditiously was because basically, unless the Supreme Court lifts an injunction, in the case that I'm reading here, the president will be able to propose rescissions for the funds that are set to expire on September 30th, 2025.

And allow those funds to expire without obligation if Congress does not act before that date. So this idea that sort of, they see this possibility of pocket rescissions as a way to help effectuate things that they are trying to do in other ways as well.

So maybe, next thing I wanna ask about, is this question of like, what, if anything is there to be done about it? So, Phil, you kinda started to get at this before, but if Congress decided that, this was behavior that they did not wanna tolerate from, from the executive branch, what, what can they do? Both sort of in the short term, what are potential other legislative remedies to, to the situation? Maybe start with you, Phil.

Phil Wallach: Yeah. I think it's important to realize that if the administration went through with this and did not spend some funds and, and, and said, okay, these funds are expiring, we're sending them back, Congress is not without options. That doesn't have to be the last move in the game. Congress can first of all just say, okay, here's some new instructions to spend this money.

You know, and, put in some very clear instructions that it is to get spent. And, you know, I, I think they could also change the underlying Impoundment control Act language very easily to just make it clear that pocket rescissions are not a thing you can do. You know, you could, you can argue as, as Zachary has done well here, that, that the statute already doesn't really allow for this possibility.

But it, you could easily make the statute clearer to just say, once you're approaching the expiration date of funding, rescissions no longer become an option. And you know how you would time, that would be something you'd have to work out, but you could do it pretty, pretty straightforwardly. Now the other thing I'd have to say is that Congress and the presidency have a lot of informal considerations when dealing with each other, and really the, the relationship between appropriators and agencies is a sensitive one.

That works through a lot of informal channels as well as formal ones, and I think there's, there's sort of a presumption of goodwill that's existed for many years even in these difficult partisan times. And we may just be coming to the end of that. If we are entering into a period where Congress can expect no goodwill from the executive branch in sort of trying to work out what Congress wants and do it, then Congress could shift to a much more exacting, micromanaging style of writing its appropriations laws.

It could be much more careful about what it says about when funds can expire or why funds can expire. So I, I, I think we've lived in an era where the norms of comedy between the two branches have, have shaped our conduct. And, and if Congress thinks that we're entering into an era where, where that can't hold, they do have the power to, to, to write the statutes differently.

Molly Reynolds: Zach, anything to add on, what Congress, could do about this? If it wanted to?

Zach Price: So I, I agree with what Phil said. I mean, Congress certainly has tools here. It can reappropriate money, it can threaten administration priorities where it needs congressional money. I mean, there is a level in which those powers depend on its laws, having force. So if that doesn't work anymore, then, then, you know, we're, we're in a new era in a lot of ways. But I do think congress ha has power.

The administration needs the Congress for a lot of things. In a lot of ways. You know, we could talk about litigation. We've got a lot of litigation over these issues now, historically. These types of questions have not been litigated all that much, and that means there are a lot of untested legal issues.

But part of the reason for that is because normally it's been handled instead through the political process. In a lot of ways, the political process is better suited to managing these, these types of issues than litigation. So, you know, Congress has not put up a lot of resistance, at least overtly so far.

I mean, it, as we talked about pushback, you know, it, it changed the rescission proposal a little bit. I, I saw a story recently where a bunch of people were saying pretty annoyed things about the possibility of pocket rescission, so we might start to see a bit more backbone in Congress, but so far we've really had this dynamic that we've seen for a while, but in an even stronger fashion of co partisans in Congress not wanting to cross the, the executive branch.

Phil Wallach: Right. Yeah, I, a lot of what I said about Congress having an easy time pushing back presupposes that there's some sort of majority or super majority coalition in Congress willing to stand up for the institution's own equities and prerogatives. And that's not at all been obvious lately. So, in some ways.

You can interpret this whole presidential appropriations in Zachary's term, a as a, as a way of exploiting Congress's unwillingness to, to stand up for itself in in the current moment.

Molly Reynolds: All right, Phil, Zach, I think we will leave it there. Thank you so much for joining us.

Zach Price: Thanks Molly. Yeah, thanks so much for having me.

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