Home > Major Acts of Congress > Balanced Budget and Emergency Deficit Control Act (1985)

Jonathan L. Entin

The Balanced Budget and Emergency Deficit Control Act (P.L. 99-177, 99 Stat. 1038) is popularly known as the Gramm-Rudman-Hollings Act after the names of its principal sponsors, and was designed to reduce the federal budget deficit. The law did so primarily by setting seemingly rigid deficit limits and authorizing mandatory, across-the-board spending reductions to reach them. Although the Supreme Court ruled that a key part of this mechanism was unconstitutional, the basic concepts embodied in the statute have continued to influence the process for adopting the federal budget.

BACKGROUND AND MAJOR PROVISIONS

Although the Constitution does not mandate a balanced budget, it does require Congress to approve all federal expenditures (Article I, section 9, clause 7), and it empowers the federal government to raise revenue through taxes, tariffs, and other measures (Article I, section 8, clause 1). The latter provision also authorizes the government to incur and pay debts. Congress has passed legislation establishing procedures for adopting the federal budget (e.g., the Congressional Budget and Impoundment Control Act) and for handling the national debt (e.g., the Public Debt Act).

The government regularly ran a budget deficit in the years following World War II, but the situation became especially serious in the early 1980s. Between 1981 and 1985 the annual budget deficit nearly quadrupled, and it threatened to remain at high levels indefinitely. Further, if nothing were done, the total national debt would have more than doubled between 1985 and 1990. The Balanced Budget and Emergency Deficit Control Act was adopted in the fall of 1985 in connection with a measure that raised the national debt ceiling.

The law's most important feature was a schedule for reducing the federal budget deficit to zero by 1991. It fixed a maximum allowable deficit for each fiscal year. If Congress and the president failed to adopt a budget that met the target, the law called for across-the-board spending reductions in most federal programs. Responsibility for determining whether the budget satisfied this requirement was given to the comptroller general, who is the head of the General Accounting Office (an agency that does research and investigations at the behest of Congress). The comptroller also had the authority to order the across-the-board spending cuts needed to lower the deficit to the required level.

LEGAL CHALLENGE

Opponents of this law immediately challenged its constitutionality. In Bowsher v. Synar (1986), the Supreme Court ruled that the comptroller general could not exercise the authority given to that official under the act. This decision left the rest of the statute intact.

The Court explained that the task of implementing a law passed by Congress is an executive function, and that the Constitution (Article II, section 1, clause 1) gives the executive power to the president. Of course, the president cannot personally execute all the laws passed by the legislative branch. Therefore, the chief executive must have the assistance of agents who are subject to presidential supervision and dismissal to assure their loyalty and efficiency. The comptroller general, in the Court's view, was not accountable to the president. Instead, this official was legally subservient to Congress. Allowing an official who is accountable to the legislature rather than to the president to execute the law violated the separation of powers embodied in the Constitution.

What made the comptroller general subservient to Congress? It was, the Court explained, the procedure for firing that official. The president could not dismiss the comptroller for any reason. Congress alone was in charge of the process for removing the comptroller. It could initiate removal proceedings and could even dismiss the comptroller over the president's objection.

The ability to discharge executive agents has long been regarded as a crucial component of presidential power. This issue lay at the heart of the controversy over the discredited Tenure of Office Act (1867), which required the president to obtain the Senate's approval to discharge a cabinet member. (President Andrew Johnson's defiance of that law was the primary basis for his impeachment.)

The comptroller was subservient to Congress, the Court reasoned, even though the legislative branch had never threatened to remove anyone from that office for any reason. All that mattered was that the comptroller had no reason to fear the president but every reason to fear Congress in order to stay out of trouble and remain on the job. The comptroller could continue to perform other duties on behalf of Congress but could not play any role in executing or enforcing federal statutes.

AFTERMATH

The Supreme Court's ruling did not address two other problems with the statute. First, the law addressed only the projected deficit at the beginning of each fiscal year, not the actual deficit at the end of the year. Second, the law did not require that the projected deficit be based on realistic assumptions about inflation and economic growth or on standard accounting principles.

In response to the Court's decision, Congress amended the statute to give primary responsibility for implementation to the Office of Management and Budget, an executive branch agency, with advisory input from the Congressional Budget Office. In 1987 Congress revised the deficit targets, extended the deadline for eliminating the budget deficit, and changed the procedures for enacting the federal budget. Subsequent laws have altered the focus from the overall deficit to spending caps and other mechanisms designed to limit the growth of discretionary expenditures.

Meanwhile, Congress and the president have managed to avoid the across-the-board spending cuts authorized by the original Balanced Budget and Emergency Deficit Control Act. Only in late 1990 were such cuts ordered, but they were repealed in early 1991 after Congress and President George H.W. Bush reached agreement on a budget that complied with the deficit limit for that year. At the same time, the federal budget deficit was eliminated during the second administration of President William J. Clinton. That happened because of improvements in the national economy, however, not because of the threat of automatic spending cuts. The deficit's elimination was short-lived, as it recurred as a result of spending and tax policies during the administration of President George W. Bush.

See also: CONGRESSIONAL BUDGET AND IMPOUNDMENT CONTROL ACT; PUBLIC DEBT ACTS.