John Popp: From The Heritage Foundation, this is Heritage Explains.
Mark Guiney: The U.S. government currently prints seven denominations of paper money, and chances are you’ve seen all of them, $1, $2, and yes, they are currently printing those, $5, $10, $20, $50 and 100, but you might not be as familiar with some American paper money that’s still floating around out there that is fully legal tender. If you find one of these bills, you can take it to a bank and they will honor it. There’s a $500 bill featuring the face of President William McKinley, which was printed starting in 1945.
There’s a $1,000 bill, which was originally printed with the face of Alexander Hamilton, but after officials decided that it might be confusing since he was also featured on the $10 bill, this was changed to President Grover Cleveland. There’s also a $5,000 bill, which features James Madison and a $10,000 bill, which features Salmon Chase, an accomplished statesman who was governor of Ohio, senator from Ohio, secretary of the treasury under Abraham Lincoln, and Chief Justice of the Supreme Court. But now he’s most famous for being the guy on the $10,000 bill.
Now the sad thing is that the government stopped printing these bills in 1969 because such large bills could be utilized by criminals for money laundering purposes. However, even though our bills are smaller today, our spending problems have only gotten bigger. The US Congress controls the purse strings of the government. It’s their job to allocate our tax money in whatever denomination we send it to the appropriate use within the government. But how does that system work and why is it important for conservatives right now to understand that system?
Here to explain is director of Grover M. Hermann Center for the Federal Budget here at the Heritage Foundation, Richard Stern.
Richard Stern: I’m Richard Stern. I’m the director of the Grover M. Hermann Center for the Federal Budget. So that’s Heritage’s Center that handles budgetary policy. So it’s all things that the money the government steals from you and how they spend that money.
Guiney: And before you started here at Heritage, you spent seven years over on Capitol Hill living the life out there in the swamp. And we hear a lot at Heritage about how members of Congress are kind of animals into themselves. And you’ve had some interesting experiences with people over on the Hill. Can you talk a little bit about that?
Stern: Oh yes. Members of Congress are the swampiest of the swamp creatures. But here’s the thing that’s interesting about them. You think of a member of Congress, you think it’s formal, it’s professional, it’s a member of Congress. They are honestly some of the weirdest people I’ve ever met. They each have their own ego. But here’s the important thing, and I think this is an interesting kind of note on how Congress works. Members of Congress don’t really listen to their staff. They don’t really listen to anybody, in fact.
So they’ll have schedules, they’ll have talking points, they’ll ask you to talking points together, and then they’re like, great, thanks. They’ll throw it out. They’ll be like, nah, I just don’t feel like doing the schedule. They’ll text you. They’ll say, I’m going to come for the meeting. They don’t show up. You’re sitting there with the meeting, you’re like, I’m not sure where the member is. They’ll show up two hours later and be like, yeah, I just turned my phone off randomly. That’s members of Congress for you. So it’s an interesting note of kind of the hell that it is being a congressional staffer and what you got to deal with.
Guiney: I can imagine. So today we want to try to take apart a very thorny issue and what’s often a complicated issue that’s hard to understand, and that is appropriations. And appropriations to my understanding is part of this larger budget process, like the process by which the government puts together the way that they’re going to spend our tax money every year. Can you zoom out how does this process work? And then we narrow in and talk about why we’re so focused on appropriations this year.
Stern: Absolutely. As you said, appropriations is the power of the purse. It is the place where your money that the government’s taken comes and how the government uses that money. And it means everything from not just how the economy functions, but to which organizations get grants, whether left wing organizations get funded by the government or not. All of this gets wrapped into the appropriations process. So let’s start off with the basics of this. The constitution envisions, the founders laid out a process where you had an appropriations committee.
It has different subcommittees that handle different areas of policy and spending, and the idea of this was that every single dollar that the government steals from you and every single dollar that the government spends is handled by this committee by Congress in public transparent hearings with committee markups and everything else in full view of the American public. That was the idea, centralized, transparent process that was respectful of your money, your hard work to get there and use that money sparingly only for the core things the government actually needs to be there to do.
That was the idea. Of course, as you can imagine, we’re very far away from that today.
Guiney: Seems that way.
Stern: And in fact, I give you the, I think, more interesting part of this. The budget process is only 49-years-old. It was actually created in 1974. The entire initial concept, and frankly something that worked for a long time, was, like I said, just the appropriations committee getting together once a year to figure out what our spending was. It was easy, it was simple, centralized, transparent. The budget process was created because during the middle of the 20th century, all of a sudden we started creating mandatory programs. So that’s programs where there’s none of those hearings, there’s none of that kind of public discourse.
Congress sets into law once and then the program exists in large, many of these for forever. Stealing your money, spending your money, allowing unelected bureaucrats to make the day-to-day decisions over who gets the money from these programs with Congress never again having any kind of oversight, any kind of say or any kind of ability for the American people and voters to look at the process. After about 50 years or so of this massive just exponential creation of the regulatory state of mandatory programs, of all of these lawmaking and spending and taxing authorities that no longer went through appropriations that no longer went through these regular bodies of Congress works.
Finally, in 1974, Congress put together the budget committee, the Congressional Budget Office, and the entire process of a federal budget. Now, the idea of that was now here again finally. We’ll put everything back under one house, under one budget. So like what the founders envisioned with the appropriations committee, this will be larger, but this will be a singular process that covers all of the spending, all of the taxation, again, where the American public can have a transparent full view of what’s happening.
Guiney: Just to be clear, up until this point, I mean I always kind of assume that the system that we have is a system we’ve always had, but that’s not the case. So up until then, the government is kind of sprawling. Was there a system for kind of regulating how much money was being spent prior to our current budget process?
Stern: Not to scare everyone, but no. In fact, the closest we came to it was in the mid ‘20s. The president organically just on his own, decided to write a budget and give it to Congress. It wasn’t binding. It wasn’t a formal document. It was just his kind of the government is starting the sprawl. Here’s my take on what should happen. But there was no limiting principle. There was no overarching control. The government really could just grow at large with each individual one-off piece of legislation that Congress and the president signed into law.
Guiney: We want to put out a bill to make this agency or do this thing. We are going to tax enough to pay for it.
Stern: Or not.
Guiney: Or not. And then it’s just going to exist.
Stern: Exactly. So ‘74 was a shining moment where we were going to put it all back together, have a formal budget process that gives back this kind of structure. And but you know, we solve the budget problems, everything’s fine, and we have no national debt. Great.
Guiney: I wish we lived in that world.
Stern: As you can imagine, everything started downhill and continued going further downhill. The budget committees largely got ignored. The CBO, I think, has played an important role in presenting information to the American public and to lawmakers. They’re the body that does the scores. When people say X bill is going to cost $100 billion, that $100 billion estimate came usually from CBO, the Congressional Budget Office. However, outside of that, this organizational structure has lent almost no real structures, no real control from Congress, and so we’ve continued to have a government that spirals.
In fact, the discretionary budget, which is what appropriations are, which is again the money that once a year Congress comes together has hearings over, has shrunk from 100% of the budget to less than a third, to 30% of the budget. And that’s just if you take out the interest spending. One of the largest mandatory programs is the interest payments we make on the national debt. That should scare everybody.
Guiney: Just so I’m understanding you correctly, when we go through the budget process, we’re only talking about a third of the money that the government spends overall?
Stern: Which is the appropriations process. In theory, the budget is supposed to cover everything. But the truth is, kind of to your point on that, the last time we really went through the full on-time budget process was 10 years ago or something close to that. In fact, what Congress has done routinely for the last six years or so is not pass a budget at all. So we’ve gotten to the point where it was partial, they were shell budgets, which is a whole nother thing. They were late. Now, we just don’t even do them at all.
In fact, the only reason now that budgets get done, and if you think through the debates over Obamacare and the tax cuts from Trump and all that, all of a sudden budgets were part of the conversation. It’s not really that anybody cared about the budget tragically. It’s that the budget document has a little kind of clause in it, a vehicle for allowing legislation to sail through the House and Senate to have what’s called expedited consideration. Now, this was written there in the budget bill in 1974 to be something where, hey, we put out a budget, we set a trajectory, we missed the trajectory.
How do we get back to it? And the idea was this little thing called reconciliation was there to square up to reconcile between your budget trajectory you had set and where the real fiscal state of things are. It wasn’t meant to pass sweeping legislation like Obamacare. It wasn’t meant to radically transform the country the way that the misnamed Inflation Reduction Act was. That’s what reconciliation was there for. But of course, Congress being Congress looked at it and said, wait a second, I can do anything I want pretty much in this reconciliation bill.
I can pass once a generation sweeping legislation and stuff it into this reconciliation vehicle. So for practically a decade at this point, the only time Congress “does a budget” is not really to use the budget to corral spending, to organize the government. They use it to get access to this reconciliation tool so they can put together sweeping legislation that often increases the deficit and spends more of your money and then sail it right through Congress.
Guiney: Backing up to this mythical world of 1974, can you take us through what in an ideal world, the passage of a budget would look like if we were playing by the rules that we set?
Stern: Absolutely. What happened is basically at the beginning of the year, both the president would offer a budget to Congress that really walks through in detail what he wants, what the programs are going to spend, what do those unelected bureaucrats are going to do, how this mandatory program’s going to work, etc. Around the same time, the Congressional Budget Office puts together its annual budget and economic outlook, which is their picture of where they think things are, where they think things are headed. So everyone can look at both, can think through both.
And then in April or by April, mid-April, Congress would’ve passed budget resolutions that in their own terms detail out exact spending revenue limits and all manner of other things related to each budget function category, all the program sets, discretionary, mandatory and set up these enforceable limits. So when they would say in a budget resolution for these functions, the amount of money is X dollars-
Guiney: And this is Congress doing this part.
Stern: Congress, yes.
Stern: What it means is that then if Congress wanted to consider legislation going above X, it wouldn’t be an order it couldn’t be voted on. These would be real enforceable limits. In fact, the administration is actually required to cut spending on their own if these limits are not followed. That’s ideally what would happen. Congress would pass this resolution, it would make those enforceable numbers that the administration has the cut spending if they violate the spending allowances, and then Congress would begin the work kind of April into May on appropriations bills.
So this is where that 30% of the budget that’s discretionary starts getting worked on. You have committee hearings over the summer through June and July, the bills would go from the committee to the floor, and then somewhere between there and mid-September, you’d actually pass these appropriations bills. They would get signed into law and now you have the robust kind of cover of the budget resolution over the mandatory programs. You have real appropriations bills. Each of the 12 of them individually considered with hearings and etc., all passed into law so by October 1st, the start of the fiscal year, you’ve got a new discretionary set of bills.
You have the budget resolution. It’s all locked into place.
Guiney: So, that discretionary component of the budget, what differentiates discretionary spending from non-discretionary? What sets that apart?
Stern: It’s a great question, and honestly, this is something that members of Congress and staff struggle with because at some level there’s almost no difference. But here’s, I think, a good example that kind of makes sense. So if you think of your mortgage payment or your rent, that’s like mandatory spending for the government. You’ve already signed a contract, you’ve already pledged your money in the case of a mortgage for 30 years. So you’re not going to every year, every month, think through how much you’re spending on your mortgage. It is what it is.
You got to pay it. Your grocery budget is discretionary. So you have an idea of how much you’re going to spend, but actually you haven’t committed to spend it until you walk into that grocery store and pick up all the impulse items, for me it’s ice cream, and put it on the conveyor belt. So, that’s the way to think of it. Discretionary spending is you have a sense of what we’re going to spend, but it isn’t committed until you do it and it’s up regularly, where mandatory spending is like your rent or your mortgage payment. It’s something you’ve already signed the contract on.
It’s something that’s going to continue. You know what that number’s going to be if you just leave it on autopilot. If Congress went home and never showed back up to work again, these programs would continue to steal your money to make obligations to fund in many cases the left wing, new infrastructure and all these other things and Congress never gets to look at them again. The discretionary programs, Congress once a year has to look at. If Congress doesn’t pass a bill funding them, they lose funding at the end of that year. That’s the major difference.
Guiney: And then appropriations, when we talk about that, really all that’s basically a fancy word saying like parceling out essentially is what’s happening. And then there’s 12 committees. Is that right?
Stern: Yeah. So the appropriations is just the discretionary spending. Each of those 12 subcommittees is tasked with kind of a theme to build. So military construction and VA is one. Defense is another. Energy and water is one. Ag and rural development is another. But what’s happened though, and the idea of course was each would get their own subcommittee hearing, their own full committee hearing. Each would go to the floor by itself with a digestible amount of bills of ledge texts to look through. They’re all related to each other policy-wise.
What’s instead been happening for a decade at this point has been omnibuses. That is what it sounds like. It’s all 12 of these thrown together in one giant bill with very little time between when it gets introduced, it gets published and when members of Congress have to vote on it. So what this has meant increasingly is that members get less say, voters get less say, that almost nobody has time to really read the whole bill and this gets sailed through and stuffed through. And I’ll tell you this part as well.
When I started on the Hill, appropriations bills, they were omnibuses, but they were still just a discretionary appropriations bill. What has happened today, and I think in the last one, only 40% of the bill text was the appropriations discretionary bills. So what’s the other 60%? Anything and everything. They’re random bills. They have nothing to do necessarily with spending or anything discretionary. They’re just somebody introduced a bill, they wanted to create a grant program that helped make the water bottle factory in their district do better.
What does that have to do with discretionary appropriations? Absolutely nothing. But this member of Congress will go to leadership. They’ll go to other people and say, hey, can I get this stuffed in here? Lobbyists will come, trade associations. And surely and slowly we’ve ended up in this world where more than half of the omnibus actually it doesn’t even have anything to do whatsoever with discretionary spending. It’s just this kind of pork-filled bill that everybody can get every little pet project they want that they’ve got support for stuffed into it.
That’s part of the nightmare of where we are now.
Guiney: Gotcha. And then what happens at a certain point then now Congress, whether it’s the appropriations bills as it should be or an omnibus bill, which is combining everything, at that point, they vote, right?
Stern: Yes. And here’s the other part of this. As I said before, the fiscal year ends at the end of September. We haven’t passed an omnibus by October 1st in a decade. And what we do is a CR, this is a continuing resolution. It’s where we simply say, hey, we’re going to take the discretionary funding levels, all the little provisions that dictate how that spending can go. We’re going to just extend it by a week, a month, a couple months. And in fact, you’re listening and you’re saying, wow, shouldn’t Congress do this on time? Shouldn’t Congress and the president get things done in the fiscal year?
They should. But oftentimes, that new omnibus is done in December. In fact, it’s been done as late as March. Imagine your fiscal year starts on October 1st, and you’re not actually putting together the bill that funds that fiscal year until mid-March. That is oftentimes what’s been happening.
Guiney: And then there’s the whole conversation about government potentially shutting down and as a result of budgets not being passed. Is that right?
Stern: Yes. Well, I said not budgets of course, but the approps stuff. But here’s, I think, the crucial thing about this. The way the budget was envisioned, the way the founders of course had envisioned the entire process is that if Congress didn’t continue appropriating, it would shut down because Congress has made the determination that isn’t an appropriate thing to steal money from Americans to fund. We now have a system where because of mandatory programs, because of overlapping authorizations and appropriations and everything else, when a government shut down, you can’t see my air quotes, but there, happens, it’s a third of a third of the government that actually shuts down.
But that’s what happens when the appropriations bills don’t get signed into law for the new fiscal year.
Guiney: Gotcha. So now that we kind of have somewhat of a grasp on the overall budget process, why are we so focused on appropriations at Heritage right now?
Stern: This is what’s hot right now, of course, but part of this is as we’re talking about here, the omnibus has become the major, what’s called, must pass bill per year. Which is to say that that third of a third of the government shuts down if we don’t pass and sign into law the appropriations bills. So everyone views it as a bill that has to get signed into law. So anything you want, whether it’s a provision that makes sense in discretionary spending or not, as we’re talking about, if you want to get it signed into law, the train you want to get it on is the omnibus train.
It’s everybody’s focus. And even when it’s not in the news, it’s always a prime topic of focus on the Hill because of that position, because of what it can do. Because everyone knows ultimately something’s going to pass the House and the Senate and get signed into law. Now, what’s happening right now, as we talked about earlier, the ideal process is that all 12 of these biddies would’ve been through the committee out of May. All of June, all of July would’ve been devoted to floor action. That’s where the bills come to the floor. Now, here’s what’s important about this.
We are halfway through July, none of these bills have come to the floor. In fact, not even all of them have come out of committee yet. That’s unprecedented. What this is an attempt to stop the amendment debate that would happen. This is the inside baseball of the House and the Senate. But what happens traditionally is the approps bills come to the floor, what they used to come under to the floor under is something called an open rule process. An open rule process is where members of Congress can offer any amendment they want that follows the rules to the appropriations bill.
Guiney: So they can say, this bill’s got this, it’s got that, I don’t like it, or it should have this or that, and I want to change it.
Stern: Exactly. Now, this might surprise you, but members can’t just do that normally. In fact, in the House of Representatives, you have to offer your amendment to something called the rules committee. And then the handful of people on the rules committee decide whether your piece of legislation gets a vote on the House floor at all. So the appropriations bills were the one place where members could offer amendments demonstrating any kind of policies. In fact, the Hyde Amendment that makes sure that your taxpayer money doesn’t fund abortions, that’s an appropriations limitation provision.
It’s a policy rider. That’s an appropriation that started its life as an appropriations amendment offered on the floor. So this process of members coming to the floor, being able to offer amendments has been pivotal in our history for putting good policy forward, for demonstrating vote support from what are so-called rank and file members of Congress, and ultimately getting these incentives just into law, but is permanent precedent in our legal traditions. By having none of these bills come to the floor yet, by delaying this process, by frankly maybe we’ll have one or two bills on the floor, but if most of them don’t, it means that that amendment process doesn’t happen.
It means that good policy, good legislation can’t get forced onto the floor, can’t be forced by conservatives to get a vote at all. And so this will leave conservatives in the position of saying, of leadership, frankly, being able to say, well, when we negotiate the omnibus, we pulled out all of the good provisions you liked in the bill, demonstrate support for them. And conservatives can say, well, I can’t. I didn’t get to have the amendment votes during the summer. That’s part of the strategy from leadership.
Guiney: So at Heritage, we’re very focused on solutions, and this is a very kind of thorny problem with a lot of in and outs. What should we as patriotic Americans, how should we be approaching this issue?
Stern: So I think we need to encourage the members that want to offer those good amendments. Frankly, one of the things that we’ve been looking at, and we’ve been talking with our friends on the Hill about is actually introducing standalone bills, such as new piece of legislation that have what would’ve been appropriations amendments in them so that they can get co-sponsors. So this way when leadership says, hey, you guys didn’t get to have amendment votes because we didn’t let you have amendment votes, they can say, no big, we’ve got a bill right here.
It’s got the 50 provisions we would’ve want to put in there and look, it’s got 200 co-sponsors. Now, you can’t ignore us. So I think one of the things that we do at Heritage, of course, is we help to form what those good policies are. We help to draft the legislative text, but we’re also there to help with some of this strategy on how do you promote good policy, how do you put good policy in a position where it can actually see the light of day. And so I think as paycheck Americans broadly, not just at Heritage, I’ll admit that there are patriots that exist outside of Heritage.
I think that should be our goal is to encourage good conservative members to continue to beat this drum, to put good policy up. I think we need to put pressure on leadership to actually cut spending, something they’re not doing in these appropriations bills, to continue putting up good policies. And while leadership has put some good policies, some expansion of pro-life and values defending provisions in these bills, they haven’t put most of them on that have been asked of them, and I think we all know that when the omnibus comes around, they’re going to pull those all out so they can cut a deal with Biden the way they did on the Fiscal Responsibility Act.
And then we’ll say, hey, we gave it to you in the bills that we knew weren’t going anywhere. You should be happy. I think we need to stand there and be the right wall to defend and give encouragement to our friends in Congress who are championing good policy that are actually defending American values and watching out for American taxpayers.
Guiney: Richard Stern, thank you very much.
Stern: Thank you so much.
Guiney: Thanks to Richard Stern for breaking down the appropriations process for us. And thank you to all of you for listening to Heritage Explains. Check out our show notes for more work by Richard Stern at heritage.org. You can also find him on Twitter at @richastern. If you have any thoughts, feedback, or a rare currency to share with us, send it our way at [email protected]. Coming up next week, the Southern Poverty Law Center, once a celebrated legal organization that branded itself as an opponent of hate, the SPLC has started expanding their definition of hate to include just about anything they don’t agree with.
Why does that matter? We’ll sit down with Daily Signal managing editor Tyler O’Neill, the man who literally wrote the book on the SPLC. It’s a great conversation. You won’t want to miss it. So thanks for listening and we’ll see you next week.