18 JULY 1970, Page 6


The battle of the public purse


New York—Once upon a time in America, this time of year brought a welcome inter- regnum in national politics. Congress went home to talk to the folks and the President went fishing, until the Labour Day weekend in early September signalled the end of the summer interlude. The tradition goes back a long way: specifically, back to a time before air-conditioning; and back further to when malaria was still endemic in the Poto- mac River valley where Washington lies. One distinctive indicator of the continuing crisis of our times is that, even in this congressional election year, there will be no holiday in the weeks ahead from the increasingly bitter breakdown in relations between the two heads of America's dUal sovereignty.

Three recent episodes in the growing con- flict between the White House and Congress stand out: the Senate's passage of the Church-Cooper amendment to restrict fund- .– ing of America's involvement in Cambodia; congressional over-riding of the Presidents veto of a Bill to increase Federal funds for hospitals; and congressional refusal to bail out the Penn Central Railroad on a sight- unseen basis. The common core of signific- ance in each of these actions lies in what they reveal about Congress's renewed will- ingness to use its chief instrument of power, handed down from the Stuart Parliaments— the power of the purse.

The Church-Cooper amendment was added to the Military Sales Bill by the Senate after six weeks of 'extended debate' by Administration supporters. Its passage, as was hoped in the White House, coincided with the withdrawal of American troops from Cambodia, as promised and on time. Hence, the amendment's immediate impact is largely symbolic, particularly in the light of the various 'clarifying' amendments to the amendment, which serve merely to restate the constitutional dilemma between the President's powers as commander-in-chief and Congress's explicit and exclusive power to declare war. The symbolism takes on sub- stantive meaning, however, when it is re- cognised that passage of the Church-Cooper amendment marks a break with more than twenty-five years of congressional abdica- tion in foreign affairs.

Since the last war the Senate, constitu- tionally and historically the more concerned of the two houses, has been more or less content to permit and even encourage pre- sidential independence in the conduct of foreign policy. The Tonkin Gulf Resolution, which gave LW a blank cheque to escalate in Vietnam, marked the furthest point of congressional abdication. Now the Senate has re-entered the field. The amendment may yet be knocked out or watered down by the Senate-House committee responsible for re- conciling the differing forms of the Military Sales Bill passed by the two chambers. Cer- tainly it is unlikely that the House of Re- presentatives will approve the amendment in its present form. But the Senate has now moved and not by a mere assertion of prin- ciple or expression of opinion, but rather by invocation of the legislature's fundamen- tal source of power: its discretionary author- ity to fund executive commitments.

The passage of the Cnurch-Cooper amend- ment represented a traditional exercise of legislative power, in that it was negative, a denial of funds. The initiative that it simultaneously represents is due to the area —foreign .policy—in which that power has been reasserted. The overriding of the Pre- sident's veto of the Hospital Bill by both houses of Congress—in each case by majori- ties well in excess of the required two-thirds —is a break with the past of a different sort.

Congress has often voted more funds than a President has requested. Back in the late 1950's, Lyndon Johnson, as majority leader of the Senate, laid the legislative base for MK'S claim in 1960 that the Democrats would fill the various (real and hypothetical) gaps

in America's defences. Led by Liu. Demo. cratic majorities in Congress pointed with pride to their record of consistently raising Ike's requests for military appropriations. Even non-military appropriations have occa- sionally been increased by Congress in the post-1945 era. But the congressional action on the Hospital Bill was the first time in ten years that any presidential veto has been over-ridden. That it should have come on a domestic spending programme—and one of social investment, rather than special-interest subsidies—and that the House of Represen- tatives should have taken the lead over the more activist Senate, are two more straws in the wind.

Both the Church-Cooper amendment and Congress's determination to increase Federal funding of hospitals were initiatives taken on Capitol Hill—taken, be it noted, by bipar- tisan majorities in each case. The Penn Cen- tral case represents the more usual type of congressional influence on government policy: the White House had to come to Congress in order to transform a proposed policy into a funded programme. Invoking 'defence powers' whose applicability to the transportation industry is open to question, the Administration asked Congress without prior consultation to guarantee $200 million of emergency loans to the Penn Central— as, admittedly, a mere first instalment. Mat- ters were not helped when word got around that the Penn Central had recently become clients of the President's and the Attorney- General's old Wall Street law firm. Con- gress's response echoed that of New York's financial establishment: why should the tax- payers be called upon to protect the Penn Central and its.creditors from 'the discipline of the market'? When Congress refused to roll over at a moment's notice, the Adminis- tration turned its back on the Republican leader in the Senate, who had been the channel for finally alerting them to the danger and who, as it happens, represents Pennsylvania—and sent the railroad into the bankruptcy courts.

Politically, the Penn Central case has placed Congress squarely in the centre of the nation's continuing domestic crisis—and on a non-partisan basis. That crisis is financial in two senses. Short-term, the crisis is one of 'liquidity': the ability to pay off debts as they come due. American borrowers, both corporate and municipal, have run up enormous short-term debts in order to pro- vide the goods and services which the buying and voting public demands of them. Their ability to pay their debts has been drastic- ally impaired by. the continuing inflatipn in the cost of providing goods and services and by the government's policy of fighting infla- tion with 'tight money'. During its first year in office, the Administration encouraged the Federal Reserve (America's central bank) to deny lenders—banks and other financial in- stitutions—the power to lend just when the need of borrowers to borrow even more was reaching crisis proportions. The Penn Cen- tral bankruptcy was the dramatic outcome, but symptoms of the Penn Central disease are to be found all over the American land- scape, from corporate boardrooms to city halls. (A few weeks ago, the government of New York City had its airline credit cards cancelled for nonpayment of bills.) The fact that when the Penn Central faced bankruptcy it had to run to Congress for emergency aid points up the other sense in which America's domestic crisis is financial. The services which the Penn Central pro-

vides, whatever their importance to national security, are clearly 'essential'. The form of bankruptcy which the Penn Central entered, in fact, was specifically designed during the Depression to enable railroads to continue providing such services while their finances were straightened out. As a suppliant before Congress, the Penn Central made explicit that the long-term crisis is one of financing competing, insatiable demands for 'essential' goods and services: housing, health care, urban reconstruction, mass transit and, on the other hand, national defence, to identify a few. It made explicit, too, that Congress is becoming the ultimate arbiter of what goods and services really are essential and, there- fore, which providers of goods and services will be financed.

The Federal Reserve can provide the banks with emergency funds to save other major borrowers from the short-term crisis of liquidity: it has just moved two half- steps towards doing so. But long-term deci- sions of who gets money for what purpose and in what amounts are supposed, in America, to be left to the 'free market'; the Federal Reserve, certainly, wants no part of them.

The trouble is that the short-term crisis—marked by loss of confidence, high interest rates, and unavailability of money for all but prime borrowers, led by the us Treasury itself—has demoralised and dis- rupted the 'free market'. Moreover, many demands for money for 'essential' purposes such as education and pollution control, simply can't compete on the one set of terms which the market is equipped to judge: prospective profitability. The short-term breakdown in the private financial markets and their longer-term inadequacy for fulfill- ing their historic role in today's new environ- ment mean that, inexorably, responsibility for fulfilling that function is shifting to the political holders of the public purse.

It is here that Congress's action on the Penn Central ties in with the Senate's pas- sage of the Church-Cooper amendment and the over-riding of the President's veto of more money for hospitals. Tentatively, on a case by case basis, Congress is both challeng- ing the President's unilateral authority to set priorities for the nation in areas of tra- ditional public responsibility, and, further, finding itself forced to extend public respon- sibility to hitherto unimagined areas. The con- flict between the President and Congress. is apparent when it comes to 'National Secur- ity'. Federal air to hospital construction, too, has been an accepted public activity since World War II. But the scope of Congress's challenge is being extended immeasurably by the financial crisis over which the Adminis- tration has been presiding.

Far from the peaceful interlude of yore, this-summer of 1970 is witnessing the first round in a struggle of historic dimensions: who shall determine how America's econo- mic resources will be mobilised to meet which priorities?