Power of the purse

Last updated August 15, 2024

The power of the purse is the ability of one group to control the actions of another group by withholding funding, or putting stipulations on the use of funds. The power of the purse can be used positively (e.g. awarding extra funding to programs that reach certain benchmarks) or negatively (e.g. removing funding for a department or program, effectively eliminating it). The power of the purse is most often utilized by forces within a government that do not have direct executive power, but have control over budgets and taxation.

Canada

In colonial Canada, the fight for "responsible government" in the 1840s centered on question of whether elected parliaments or appointed governors would have control over the purse strings, mirroring earlier fights between Parliament and the Crown in Britain.

After confederation, the phrase "power of the purse" took on a particular meaning. It now primarily refers to the federal government's superior tax-raising abilities compared to the provinces, and the consequent ability of the federal government to compel provincial governments to adopt certain policies in exchange for transfer payments. Most famously, the Canada Health Act sets rules that provinces must follow to receive health transfers (the largest of all such transfers). Opponents of this arrangement refer to this situation as the "fiscal imbalance", while others argue for the federal government's role in setting minimum standards for social programs in Canada.

United Kingdom

The power of the purse's earliest examples in a modern sense occurred in the English Parliament, which gained the exclusive power to authorise taxes and thus could control the nation's cash flow. Through this power, Parliament slowly subverted the executive strength of the crown; King Charles II was limited in his powers to engage in various war efforts by a refusal by Parliament to authorise further taxes and by his inability to secure loans from foreign nations, making him much less powerful.

In recent years as a result of devolution, funding for devolved issues to the Scottish Parliament, Welsh Parliament and the Northern Ireland Assembly has been determined through the Barnett Formula. This formula determines the overall budget of the devolved parliaments for devolved issues proportionally relative to spending on those issues in England. As a result, while responsibility for funding of devolved matters rests with the devolved bodies themselves, they in effect must enact policies of a broadly similar cost to those decided by the UK parliament for England and maintain that broad proportionality in order to ensure the long-term financial viability of such policies.

United States

In the federal government of the United States, the power of the purse is vested in the Congress as laid down in the Constitution of the United States, Article I, Section 9, Clause 7 (the Appropriations Clause) and Article I, Section 8, Clause 1 (the Taxing and Spending Clause).

The power of the purse plays a critical role in the relationship of the United States Congress and the President of the United States, and has been the main historic tool by which Congress has limited executive power. One of the most prominent examples is the Foreign Assistance Act of 1974, which eliminated all military funding for the government of South Vietnam and thereby ended the Vietnam War. Other recent examples include limitations on military funding placed on Ronald Reagan by Congress, which led to the withdrawal of United States Marines from Lebanon.

The power of the purse in military affairs was famously subverted during the Iran-Contra scandal in the 1980s.^[1] Congress denied further aid to the Contras in Nicaragua. Unwilling to accept the will of Congress, members of the Reagan administration solicited private donations, set up elaborate corporate schemes and brokered illegal arms deals with Iran in order to generate unofficial funds that could not be regulated by Congress.

More recently, budget limitations and using the power of the purse formed a controversial part of discussion regarding Congressional opposition to the Iraq War. On March 23, 2007, the U.S. House of Representatives passed a supplemental war budget that imposed a timeline on the presence of American combat troops in Iraq, but the legislation was not passed.

The power of the purse has also been used to compel the U.S. states to pass laws, in cases where Congress does not have the desire or constitutional power to make it a federal matter. The most well-known example of this is regarding the drinking age, where Congress passed a law to withhold 10% of federal funds for highways in any state that did not raise the age to 21. The law was upheld by the U.S. Supreme Court in the South Dakota v. Dole case. Congress was not allowed to change the drinking age directly because the 21st Amendment (which ended Prohibition in the U.S.) gave control of alcohol to the states. In 2009, Congress considered similar legislation regarding texting while driving.

This power was curtailed somewhat in a case regarding the Affordable Care Act, in which the Supreme Court ruled in June 2012 that the law's withholding of all existing Medicaid funding for states that failed or refused to expand their Medicaid programs to cover the uninsured poor was "unduly coercive", despite the fact that the federal government would pay the entirety of the states' expansion for the first years, and 90% thereafter. It was left unclear what percentage would be considered acceptable.

Other uses

In the US House or Senate, the chair of a legislative committee may refuse to give funding to a senator or other delegate or representative, or deny their appropriations bill or amendment a vote, because they refused to support a bill which the chair wanted (a tit-for-tat retaliation). While typically applied to "pork barrel" spending for special interests, it may also block funding for genuine needs of a constituency or the general public.

The administration or student government at a college or university may revoke some or even all funding for a student newspaper or student radio station, because it has printed or aired an editorial or a news article or segment critical of it. This is also an example of censorship.

Related Research Articles

An appropriation bill, also known as supply bill or spending bill, is a proposed law that authorizes the expenditure of government funds. It is a bill that sets money aside for specific spending. In some democracies, approval of the legislature is necessary for the government to spend money.

The Congressional Budget and Impoundment Control Act of 1974 is a United States federal law that governs the role of the Congress in the United States budget process.

The United States budget process is the framework used by Congress and the President of the United States to formulate and create the United States federal budget. The process was established by the Budget and Accounting Act of 1921, the Congressional Budget and Impoundment Control Act of 1974, and additional budget legislation.

A block grant is a grant-in-aid of a specified amount from a larger government to a smaller regional government body. Block grants have less oversight from the larger government and provide flexibility to each subsidiary government body in terms of designing and implementing programs. Block grants, categorical grants, and general revenue sharing are three types of federal government grants-in-aid programs.

The United States House Committee on Appropriations is a committee of the United States House of Representatives that is responsible for passing appropriation bills along with its Senate counterpart. The bills passed by the Appropriations Committee regulate expenditures of money by the government of the United States. As such, it is one of the most powerful committees, and its members are seen as influential.

The United States Senate Committee on Appropriations is a standing committee of the United States Senate. It has jurisdiction over all discretionary spending legislation in the Senate.

U.S. Senate Appropriations Subcommittee on Financial Services and General Government is one of twelve subcommittees of the U.S. Senate Committee on Appropriations. It was renamed from the Subcommittee on District of Columbia in 2007 in order to align the operations of the House and Senate Appropriations Committees. The United States Senate Committee on Appropriations has joint jurisdiction with the United States House Committee on Appropriations over all appropriations bills in the United States Congress. Each committee has 12 matching subcommittees, each of which is tasked with working on one of the twelve annual regular appropriations bills. This subcommittee has jurisdiction over the budget for the United States Department of the Treasury and General Government.

The Tax Equity and Fiscal Responsibility Act of 1982, also known as TEFRA, is a United States federal law that rescinded some of the effects of the Kemp-Roth Act passed the year before. Between summer 1981 and summer 1982, tax revenue fell by about 6% in real terms, caused by the dual effects of the economy dipping back into recession and Kemp-Roth's reduction in tax rates, and the deficit was likewise rising rapidly because of the fall in revenue and the rise in government expenditures. The rapid rise in the budget deficit created concern among many in Congress. TEFRA was created to reduce the budget gap by generating revenue through closure of tax loopholes; introduction of tougher enforcement of tax rules; rescinding some of Kemp-Roth's reductions in marginal personal income tax rates that had not yet gone into effect; and raising some rates, especially corporate rates. TEFRA was introduced November 13, 1981 and was sponsored by US Representative Pete Stark of California. After much deliberation, the final version was signed by President Ronald Reagan on September 3, 1982.

PAYGO is the practice in the United States of financing expenditures with funds that are currently available rather than borrowed.

The Taxing and Spending Clause, Article I, Section 8, Clause 1 of the United States Constitution, grants the federal government of the United States its power of taxation. While authorizing Congress to levy taxes, this clause permits the levying of taxes for two purposes only: to pay the debts of the United States, and to provide for the common defense and general welfare of the United States. Taken together, these purposes have traditionally been held to imply and to constitute the federal government's taxing and spending power.

<span class="mw-page-title-main">United States federal budget</span> Budget of the U.S. federal government

The United States budget comprises the spending and revenues of the U.S. federal government. The budget is the financial representation of the priorities of the government, reflecting historical debates and competing economic philosophies. The government primarily spends on healthcare, retirement, and defense programs. The non-partisan Congressional Budget Office provides extensive analysis of the budget and its economic effects. CBO estimated in February 2024 that Federal debt held by the public is projected to rise from 99 percent of GDP in 2024 to 116 percent in 2034 and would continue to grow if current laws generally remained unchanged. Over that period, the growth of interest costs and mandatory spending outpaces the growth of revenues and the economy, driving up debt. Those factors persist beyond 2034, pushing federal debt higher still, to 172 percent of GDP in 2054.

Steward Machine Company v. Davis, 301 U.S. 548 (1937), was a case in which the U.S. Supreme Court upheld the unemployment compensation provisions of the Social Security Act of 1935, which established the federal taxing structure that was designed to induce states to adopt laws for funding and payment of unemployment compensation. The decision signaled the Court's acceptance of a broad interpretation of Congressional power to influence state laws.

Hein v. Freedom From Religion Foundation, 551 U.S. 587 (2007), was a decision by the United States Supreme Court which ruled that taxpayers do not have the right to challenge the constitutionality of expenditures by the executive branch of the government. The issue was whether taxpayers have the right to challenge the existence of the White House Office of Faith-Based and Community Initiatives. The case centered on three Supreme Court precedents: Flast v. Cohen, Bowen v. Kendrick, and Valley Forge Christian College v. Americans United for Separation of Church & State.

The Origination Clause, sometimes called the Revenue Clause, is Article I, Section 7, Clause 1 of the U.S. Constitution. The clause says that all bills for raising revenue must start in the U.S. House of Representatives, but the U.S. Senate may propose or concur with amendments, as in the case of other bills.

U.S. Senate Appropriations Subcommittee on Military Construction and Veterans Affairs is one of twelve subcommittees of the U.S. Senate Committee on Appropriations. The United States Senate Committee on Appropriations has joint jurisdiction with the United States House Committee on Appropriations over all appropriations bills in the United States Congress. Each committee has 12 matching subcommittees, each of which is tasked with working on one of the twelve annual regular appropriations bills.

An earmark is a provision inserted into a discretionary spending appropriations bill that directs funds to a specific recipient while circumventing the merit-based or competitive funds allocation process. Earmarks feature in United States Congress spending policy, and they are present in public finance of many other countries as a form of political particularism.

The Budget of the State of Oklahoma is the governor's proposal to the Oklahoma Legislature which recommends funding levels to operate the state government for the next fiscal year, beginning July 1. Legislative decisions are governed by rules and legislation regarding the state budget process.

The United States federal budget consists of mandatory expenditures, discretionary spending for defense, Cabinet departments and agencies, and interest payments on debt. This is currently over half of U.S. government spending, the remainder coming from state and local governments.

National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012), is a landmark United States Supreme Court decision in which the Court upheld Congress's power to enact most provisions of the Patient Protection and Affordable Care Act (ACA), commonly called Obamacare, and the Health Care and Education Reconciliation Act (HCERA), including a requirement for most Americans to pay a penalty for forgoing health insurance by 2014. The Acts represented a major set of changes to the American health care system that had been the subject of highly contentious debate, largely divided on political party lines.

In the United States Congress, an appropriations bill is legislation to appropriate federal funds to specific federal government departments, agencies and programs. The money provides funding for operations, personnel, equipment and activities. Regular appropriations bills are passed annually, with the funding they provide covering one fiscal year. The fiscal year is the accounting period of the federal government, which runs from October 1 to September 30 of the following year. Appropriations bills are under the jurisdiction of the United States House Committee on Appropriations and the United States Senate Committee on Appropriations. Both Committees have twelve matching subcommittees, each tasked with working on one of the twelve annual regular appropriations bills.

References

↑ Barrett Seaman; Alessandra Stanley (Jul 9, 1984). "Cutting Off Nicaragua's Contras". TIME. Archived from the original on August 20, 2009. Retrieved 2011-03-03.

This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.

[1] Barrett Seaman; Alessandra Stanley (Jul 9, 1984). "Cutting Off Nicaragua's Contras". TIME. Archived from the original on August 20, 2009. Retrieved 2011-03-03.

[1]