Washington's Labyrinthine Ways By Otto J. Hetzel The Big "Showdown" Between President and Congress on Budget Issues Came to Pass, and House Republicans Blinked. The President successfully demonstrated that in their attempts to coerce him into accepting their budget policies, House Republicans had been willing to impose unacceptable hardships on federal employees and contractors. The Republican tactic to pressure him by holding the operations of government, itself, hostage (as the President characterized it) backfired, making government closure the issue, rather than new GOP budget priorities. Clinton drew a line in the sand, stating "he wouldn't be blackmailed." The tactic also gave Clinton a pulpit for his policy-based resistance to proposed cuts in Medicare, Medicaid, welfare benefits, and education programs that have increased his popular support and hurt Republicans with less than a year before the next elections. When Senate Majority Leader Dole split with Speaker Gingrich on the Republican tactics, Clinton was able to paint House Republicans into an indefensible corner. Rather than forcing the President to cave-in, Republicans had to fold, and then left town until January 23, just before record snows brought the city to a halt anyway. Dole, the Republican presidential front-runner, was faced either with displeasure from conservatives important to this nomination or positioning himself as a statesman for the November elections. He chose the latter, refusing to continue the closedown of much of government that had been providing Clinton with a high-profile, principled basis for resisting Republican policy changes. House Republicans finally agreed to two continuing resolutions, both quickly signed by the President. One provided funding for certain protected federal programs and activities, such as Meals on Wheels and the National Parks and Museums, for a longer period (to take activities off the table where hardships were most obvious). The other resolution provided funding for all federal operations for which appropriation acts had been approved (nine departments and thirty-eight agencies), but at less than current levels, and only through January 26, 1996. It was contingent on Clinton submitting a proposed federal budget reduction plan, calculated to balance the budget in seven years, and had to be certified by the Congressional Budget Office as consistent with its fiscal predictions, not those of the Administration. Within hours, Clinton complied. Thus, all federal workers are back to work, at least until several days after the State of the Union speech. Ironically, just as the employees were to return, the largest snowfall of the decade in Washington, D.C., if not the century, delayed their return for several days. Will There Be a Resolution of the Budget standoff Short of the November Elections? Clinton's proposed plan to balance the budget was obviously so different in its priorities from those of the Republicans, as could have been anticipated, that it was immediately rejected by Republicans, as were his four previous proposals. Especially when different parties control the Presidency and Congress, any presidential budget proposal is usually D.O.A. in Congress. Thus, resolution of the budget by January 26 is no sure thing. Republicans may seek to obtain sufficient support for their priorities directly with Democratic members, but it won't be easy. The House Democratic leadership does not want any budget agreement, so it will be difficult even attempting to achieve that. Contingency plans to carry on government through continuing resolutions at reduced levels from the past year, in anticipation of no budget agreement, are underway. What may result is an agreement to disagree, and leave resolution for the November elections. That would be refreshing, an election based on policy differences, not thirty second ads. Whose Forecasts of Fiscal Events, and on What Criteria Calculations Should Be Based, May Determine if Budget Agreement Is Possible. Congress created its own Budget Office (CBO) in 1974 to provide it with its own figures, so Congress didn't have to continue to rely on the President's Office of Management and Budget calculations and forecasts. The difference in those forecasts have allowed both sides to make claims discounted by the other. Those differences were the basis for Republicans requiring the President to submit a plan that used the CBO estimates to balance the budget in seven years. Under the Democrats, the CBO established a professional reputation as above political posturing and for independent judgment. Its figures often disappointed Democrats on the Hill. With the GOP takeover of Congress, the CBO director was replaced. Whether the prior credibility of that office will be sustained may be determined in the current budget dispute. Recent more favorable economic forecasts from CBO, which admitted it underestimated favorable second quarter economic growth, have served to narrow the gap between Congress' and the President's budget plans. Another proposal to bridge this money gap has been recalculation of the Consumer Price Index (CPI). This would reduce differences between the respective plans by changing assumptions used to calculate expenditures over the next seven years. The proposed change would reduce increases by limiting use of more volatile elements in the formula used to calculate the Index. This approach has been strongly rejected by the Democratic congressional leadership because it would limit cost of living increases for many retired persons and others whose benefits are measured by CPI changes, who must pay any cost increase when they occur. It is also important that the cost figures used not be misleading. Some have challenged Republican efforts to downplay the extent of their cuts as misleading, citing Speaker Gingrich's assertion that the differences in funding between the Republicans and Clinton are minimal, and that Republicans are not actually cutting programs such as Medicare. The Speaker references "increases" in Medicare funding under his plan, from $4,800 now, to $6,700 by 2002, to support his claim,failing to disclose that the increases are not inflation adjusted for this seven-year period. Some Democratic estimates assert that more than $8,000 may be required just to provide the same level of services by 2002, given inflation and cost increases for products and services, a $1,300 cut rather that a $1,900 increase. Since any long-term budget plan mainly involves much guess-work, accurate forecasting is critical. What does not seem to have received enough attention is the possible effect that substantial reductions in government spending may produce on the economy, including loss of taxes on reduced economic activity. In the past, government has often "pump-primed" the economy to get it going by making expenditures. It stands to reason that reduced federal spending could have the opposite impact and that the ripple-effect could carry over to loss of business in the private sector creating profound consequences to the economy overall. A recent George Mason University computer analysis of the effects of Republican balanced budget proposals on the D.C. area foresaw a cut in job growth by 50 percent. Insecurity about employment caused miserable retail sales this last holiday season. Layoffs in government and the private sector, most recently by AT&T, fuel those fears. Actual reductions in consumer buying power are now appearing. Loss of employment, and also any effective government safety net as well under many current proposals, seems akin to "firing one's customers" as one commentator recently put it. With similarities being drawn to the Republican policies of the Roaring 20's before the Great Depression, it would seem that we need more reasoned thought on these forecasts and less polemics. A Balanced Budget Metaphor Has Obscured That the Debate Involves Fundamental Differences in Government's Role and Use of Funds. What clearly remains in dispute between Republicans and Democrats is who will benefit and who will lose under different balanced budget scenarios. The debate should be over what roll government should play, how programs will be managed, and how much administration will be turned over to the states. The attention focused on a "balanced budget" is misleading and tends to cloud the issues at stake. Any budget plan for a number of years, balanced or not, is no more than a plan. As a legal matter, no Congress can bind its successors. A new Congress in 1997 could reverse any decisions made now. Thus, even if a plan were agreed to now, it would have little binding effect thereafter. Perhaps any commitments could be used politically, but what should be understood is that absolutely essential differences in perspectives about the role and function of government are at stake in this debate. Many regard Republican proposals for transfer of program administration to states as simply the means to the end of lower federal expenditures for these programs. The cost of administration is likely to be essentially the same. Thus, the two basic issues are whether national norms will continue to apply country-wide, and whether federal funding levels to support the poor will be maintained. Differentials in state social support can generate undesirable responses and even movement of population. Block grants to states are viewed by many as simply the means to substantially lower federal expenditures on domestic programs that are part of the social net providing some reasonable level of support for the poor. Once management is out of federal hands, funding levels are likely to suffer. These issues are at the heart of current discussions about welfare programs that have divided Republicans and Democrats and delayed changes in welfare "as we have known it." These policy differences in the role of government should be the focus of discussion directly. Perhaps the 1996 elections can provide the forum. The Failure to Fund Government in a Timely Manner. Over the decades, when delays have occurred in Congress in providing appropriations for federal activities, the problem has been resolved by a "continuing resolution," maintaining and continuing the past year's funding levels until the new congressional appropriation is approved. Congress' own timetable (frequently violated) calls for enactment of all appropriations before October 1, when the new fiscal year starts. This year, the Republicans were later than usual with even enacting most spending measures, and going into the second week of January only five federal departments, Congress, the White House, and the Postal Service have had appropriations enacted by Congress and signed by the President. The other reason for the delays is that the President has vetoed a number of Republican appropriation bills or continuing resolutions because they contained significant policy changes with which he disagreed. Appropriation Cuts Through Continuing Resolutions. The Republican leadership, by using individual department and agency funding measures as a vehicle to impose Republican policies to delete and significantly modify existing federal programs, has already been effective in cutting funding for disfavored agencies even before adoption of the new appropriation acts. The delays in enactment have required use of continuing resolutions to provide interim funding. These first occurred last October and extended through mid-December, when their discontinuance resulted in a large-scale shutdown of government and the showdown on the budget that occurred. Even the continuing resolutions, however, Republicans achieved part of their objectives, reductions in federal spending. The new wrinkle, given that they intended to make severe cuts in programs anyway, was to limit expenditures under the continuing resolutions to a percentage of last year's budget, say 65 percent, rather than at the prior year's level. In fact, the continuing resolution now applicable until January 26, 1996, contains a provision which specifies that no department or agency funding will be reduced below 75 percent of last year's level during this time period. Understanding the Anti-Deficiency Act in Case Worker Furloughs Occur Again. The chances are that almost everyone is confused over which federal workers must continue to work, and who gets a paid vacation (furlough). The confusion has been compounded by press and government officials, who have coined a description not in the statute "essential" versus "non-essential" federal workers in determining who must show up and who gets a vacation during the period Congress has failed to provide an appropriation. (While pay is not guaranteed, it has almost always been provided after the appropriations have been enacted.) The relevant federal law, the Anti-Deficiency Act deserves greater exposure. Three provisions of the Act, enacted in 1950, 31 U.S.C. .. 1341, 1342, and 1350, contain the gist of the applicable law: that an officer or employee of the U.S. Government may not make or authorize an expenditure or obligate funds, or involve the government in a contract or obligation for payment of money before an appropriation is made. Such officers and employees cannot even "accept voluntary services" or employ personal services exceeding those authorized by law. There is an exception "for emergencies involving the safety of human life or the protection of property," derived from the 1884 forerunner to the current statute. The objective was to prevent obligating the federal government to payments that Congress had not approved: "No money shall be drawn from the treasury, but in consequence of appropriations made by law." U.S. Const. art. I, 9, cl. 7. Apparently in 1990, Congress was concerned that the concept of "emergencies" was being interpreted to loosely, so it added a statement that emergencies do not include "ongoing, regular functions of government the suspension of which would not imminently threaten the safety of human life or the protection of property." Section 1350 makes violation of the restrictions in the other two sections a felony. There you have the law; no mention of "essential" workers. It is a term borrowed by reference to which workers must show up when there is a snow emergency! Lapses in appropriations have occurred at least seven times before the current showdown, but they ranged only from several hours to three days. Clearly many law enforcement, FAA air control activities, VA hospital services, and other government functions must continue and other legislation obviously contemplates no interruption of such critical government functions. Multi-year and indefinite appropriations for specific government functions as well as express contracting authority also exist to ensure funding for specific programs. Orderly termination of government activities seems reasonably contemplated, as well. The key issue, however, is the scope of the "emergency" exception for the large segment of the government that requires annual appropriation of funds to operate. The Attorney General has provided advice on how to interpret what constitutes such "emergencies" that "imminently threaten life or property" when what is popularly referred to as "shutting down the government" (even if a number of functions will still be carried out) becomes necessary because of lapse of appropriations. The Office of Legal Counsel in Justices's August 1995 opinion appeared to anticipate the current showdown. It points out that the emergency exception in . 1342 does not by itself authorize paying employees in such circumstances, but does allow entering into obligations to do so. Hence, the current situation where federal workers don't receive paychecks, but (unless furloughed because they are non-emergency personnel) must show up. Payment of obligations for those who show up will be delayed until funds become available. The obvious question is what constitutes an "emergency." The 1981 opinion required "some reasonable and articulable connection between the function to be performed and the safety of human life or the protection of property"; and "some reasonable likelihood" these objectives "would be compromised, in some degree, by delay in the performance of the function in question." The 1995 opinion, recognized that the 1990 amendment needed to be accommodated since Congress specifically referred to "an overly broad interpretation" in the 1981 opinion. But the only adjustment was adding "significant" before degree, making the phrase, "compromised, in some significant degree." Well, that certainly helps. The opinion concedes that the amendment's language "seems intended" to limit the emergency exception permitting obligation of funds, although it downplays the change, stating that "we do not believe that the amendment adds any significant new substantive meaning" to the pre-existing portion of the statute, reasoning that the concept of "imminent" in conjunction with "emergency" is thus largely redundant. Justice concludes that the emergency exception applies only "where the threat can be reasonably said to the [sic] near at hand and demanding of immediate response." So, now you have the government's word. Any government function during a partial shutdown must meet that definition. Chances for a felony prosecution seem minimal. Want to bet on how many employee's activities actually met that test during this last shutdown? Undercutting Normal Congressional Allocation of Powers to Authorizing Committees. Democrats have complained that using appropriation measures intruded upon powers generally reserved for authorizing, and not appropriations, committees, and is a backdoor attempt to reverse decades of policy decisions. Using appropriations acts for this purpose has not occurred often, due to Congress' own internal procedures. Policy decisions have been left to the substantive or authorizing committees, such as Banking and Financial Services (formerly Banking, Finance and Urban Affairs) or National Security (formerly Armed Services) in the House and similar committees in the Senate. Normally any policy changes would have to be considered program-by-program when reviewed by the substantive legislative committees that authorize, but do not actually fund, government programs and activities. Appropriations under prior internal rules of Congress were not used as a vehicle for new policy legislation because an objection by any member could prevent it, but only for funding (or not funding) existing programs. While major policy changes are often imposed by the authorizing committees, generally each provision would normally require separate consideration for each program, and would come before the full House in an authorization bill for a specific department. This is the first time that the appropriations committees have been the vehicle for bypassing such consideration. It appears to have been possible in the House only because the Speaker has aggrandized so much power in his office to the detriment of committee chairs, and because with the takeover by Republicans, traditional norms are more easily overridden since Republicans adopted House rules that undercut the authority of committee chairs, for instance by setting term limits on their holding those positions, making them more beholden to the Speaker. The House Republican Contract With America, Thus Far Essentially Unfulfilled. The Contract, almost a mantra of House Republicans, for which they claimed an electoral mandate, has fared little better than their attempts to strong-arm budget concessions from the President. Only two of the twelve basic items in the Contract were enacted: (1) subjecting Congress to generally applicable employment laws and (2) restrictions on unfunded federal mandates on states. The balanced budget amendment (3) was rejected and Republican budget measures have not been agreed to by the President. Despite presidential acceptance, no agreement has been reached on line-item veto authority (4), perhaps out of fear of how Clinton might currently use it. Cuts in crime spending, toughening sentencing and reducing criminal appeals (5) are stalled over Republican disagreements on issues, such as Clinton's anti-terrorism legislation. House-Senate compromise on welfare changes (6) faces a Clinton veto and reworking. Tax cuts (7) of $500 per child, reduction of the capital gains tax, expanded IRA savings, and repeal of the "marriage penalty," some $245 billion in cuts, are likely at best to exceed the roughly $100 billion acceptable to the President. Many feel tax cuts and balancing the budget are inconsistent. Repeal of social security income limits subject to tax and increased outside income without loss of benefits (8) have not made it through both houses to date. Defense spending increases were achieved, Clinton reluctantly approving $7 billion more than he asked for; but, the missile defense system and limits on peacekeeping operations have been vetoed (9). Restrictions on regulations by government for health, safety, and the environment (10) were passed in the House but stalled in the Senate. Restraints on litigation (11) have had mixed results. Limits to punitive damages, overhaul of product liability laws, and loser pays provisions passed in the House, but the Senate approved only a narrower product liability bill, so issues are in conference committee to reach agreement. Security fraud changes narrowing security act liability passed in both houses and they overrode the President's veto. Term limits (12) were rejected even by the House. Was that surprising? Bill Making Federal Security Fraud Cases More Difficult to Establish Becomes Law over Clinton Veto. Congress for the first item overrode the President's veto on heavily lobbied legislation reducing exposure for securities fraud cases. The President announced his opposition only at the last minute, and thus, many Democrats in Congress had already announced their support and did not change. He opposed provisions that made it extremely difficult to establish a violation since plaintiffs would have to allege on filing facts sufficient to demonstrate a clear intent to defraud. The measure appeared to benefit from public discontent with large verdicts obtained by lawyers and allegations of frivolous lawsuits. The latter is now more than adequately covered under Federal Rule 11. The measure was strongly supported by accountants, who have been exposed to extremely high damage claims and settlements as a result of charges their audits of the savings and loan industry were inadequate, and by high technology companies, who have encountered damage claims based on failure to achieve promised results. The law will make it more difficult to sue accountants for "aiding and abetting" security law violations, the source of substantial judgments against some firms. The basis for damages is also more limited. State law was not directly affected, and may still provide grounds for action. The Federal Debt Crisis. A second prong to the Republican pressure on the President to accept budget balancing on their terms has involved their refusal to approve an increase in the present national debt ceiling of $4.9 trillion. In November, when the debt hit the ceiling, Treasury Secretary Rubin escaped defaulting on the country's obligations by nimbly moving funds around, pending approval of an increase, and tapping several trust funds, one for federal employees' pensions. The debt issue could explode into a constitutional crisis if more temporary actions are needed. The issue will come to the fore very soon. Adding to the roughly $14.5 billion needed to be paid soon after the first of the year, over $50 billion in payments to debt holders, Social Security recipients, and military personnel is due in the first five days of February to avoid default. Jockeying to assess blame for the crisis can also be expected on this matter, and even the threat of a default seems likely to increase interest rates and make resolution of the budget crisis that much more difficult. Each percentage increase in interest costs $3.5 billion over seven years. Talk about cutting off your nose to spite your face. If You Didn't Make a Gift to Your Favorite House Member Last Year, It's Too Late Now! The House beefed up its ban on free meals, expense-paid trips and other gifts to members. The new rule is no gifts. The Senate had limited gifts to no more than $50 each and $100 cumulatively for the year. Recognizing that lobbyists contribute because of the official position held, Speaker Gingrich noted, "There's no way around it. You didn't get the gift before you were elected. You ain't gonna get the gift after you leave." The only exception is from family members and personal friends. Of course, you still may make a campaign contribution if you like. The only difference may be how the member can sue it. A More Inclusive Lobbying Disclosure Law Enacted After Fifty Years. Lobbying disclosure requirements were significantly upgraded starting January 1, 1996. Long stalled, voter discontent with special interests appeared finally to force its passage, just before year-end. The bill forces lobbyists (especially lawyers previously afforded relief) to register, disclose their clients, their contacts, what they are working on, and how much they are paid. One definition of a lobbyist who must register is a person who spends 20 percent of his or her time lobbying. Individual clients who spend more than $5,000 on lobbying and organizations spending more than $20,000 must also register and file semi-annual disclosure reports. Violators can incur fines of up to $50,000. This is the first change since 1946 in registration and disclosure requirements. The GAO has calculated that only a third of the 14,000 lobbyists estimated as operating in Washington, D.C., are registered, and even those who are, provide only limited information about their activities. The law is intended to reach lobbyists who currently advise clients but do not directly contact lawmakers or senior executive branch officials. Some criticism has been made of the law's coverage of nonprofit organizations which receive federal contracts, like Blue Cross, the Red Cross, and even churches. Dueling Holiday Policy Conferences: Renaissance vs. Dark Ages Weekends. For twelve years, President and Mrs. Clinton have attended a "Renaissance Weekend" conference at Hilton Head, South Carolina, that extends over New Year's Eve. Even with the current budget showdown, he managed a day there, getting in his usual round of golf and participating in the informal and off the record, talks at panel sessions with some 1,200 of the country's best and brightest policy wonks. Not to be outdone, some 300 prominent conservatives, private citizens and members of Congress initiated their own "Dark Ages Weekend" to spoof Clinton's traditional gathering. Their Charlemagne tennis tournament, Canterbury Tales Banquet, and William the Conqueror golf tournament were held at the Doral Country Club in Miami. A major focus of discussion was how to regain the moral high ground in the budget showdown they feel has been lost to the President and on better salesmanship of the Republican Revolution, generally. Less restrictions seemed to apply to the substance of panel discussions than at the President's weekend gathering. Ralph Reed of the Christian Coalition was reported to have advised more emphasis on the Republican Revolution's objective of returning power to the states and empowering individuals. Michael Huffington, a former member of Congress who recently ran unsuccessfully for the Senate, was quoted as urging, "If you don't use the right words you can't get the message across. Clinton is a better communicator now if Ronald Reagan were our leader, we'd win the battle." It seems like everyone likes policy discussions and to join with friends on New Year's Eve. Your Correspondent Otto J. Hetzel is a professor of law at Wayne State University and also practices law in Washington, D.C., with the firm of Pepper, Hamilton & Schee