On the afternoon of July 12, 1974, House and Senate Democratic leaders were arriving early at the White House — well before their demoralized Republican counterparts. And were they ever pumped! As they trouped into the President’s office for their photo-op, it became clear they considered this a victory party. They almost literally pranced around the Oval Office giving each other the 1970s equivalent of high-fives and chest bumps.
President Richard Nixon was about to sign the Congressional Budget and Impoundment Control Act, one of his last major acts before he resigned from office on August 9. Tucked into the minutiae of its pages was a secret weapon, little understood by most of official Washington then or now, but well appreciated by Senate Majority Leader Mike Mansfield (MT) and his deputy Robert Byrd (WV), House Speaker Carl Albert (OK) and his Majority Leader Tip O’Neill (MA), House Ways and Means Chairman Al Ullman (OR) and his Senate Finance counterpart Russell Long (LA), all in attendance.
Juxtaposed against the Democrats’ frolic was the Watergate-crushed President, standing there like a stone. His eyes were dead. He was shell-shocked and numbed by the looming collapse of his presidency. In a lifeless monotone he recited about two paragraphs, signed the bill into law, and that was that.
But what had those excited insiders known that the rest of us hadn’t? It took me years to recognize that the little drama I witnessed exemplified the Democrats’ success in embedding their statist budget philosophy into law while Nixon was still president, but powerless. The crucial provision of that budget act — baseline budgeting — gets nearly as little attention today as it did in the summer of ’74. Yet that rule has silently and relentlessly bloated the size of our government for nearly four decades.
The Budget Act of 1974, for the first time, mandated one particular approach to budgeting that the federal government would be required to use in perpetuity for discretionary appropriations. Rather than deciding the spending level of each budget account from scratch — a “zero base” — every year, or periodically, the act mandates that the Congressional Budget Office establish a “baseline” that continues and increases the previous year’s appropriation every year, until the underlying authorizing law expires — which often is never. Later Congresses added additional dollars to the baseline formula for estimated inflation, and still more for population expansion, and a list of other factors.
This “CBO Baseline” put the discretionary side of the federal budget on autopilot and immortalized most federal spending programs. Baseline budgeting is a hidden ratchet that drives up every discretionary budget line item every year, regardless of need or program effectiveness, unless Congress or the president intercede on a case-by-case basis.