Pocket Rescissions: Spending Canceled Without a Vote

GrantHey everyone, welcome back to Power Check!

MayaOh man, we've got a big one this week.

GrantFriday, quietly, close to four billion dollars in foreign aid, money Congress already signed off on just ran the clock and expired.

MayaWait, that's not a veto. That's not even a rescission. It just expires?

GrantThat's the move, and Russ votes out there saying the whole law limiting this, the Impoundment Control Act, might be unconstitutional in the first place.

MayaHold on—the law that stops a president from sitting on money Congress already voted for is the illegal part now?

GrantThat's the argument.

MayaMm-hmm.

GrantWe'll get into who's supposed to enforce that law, and why calling something illegal doesn't necessarily get the money back.

MayaAnd the Supreme Court already weighed in. Sort of.

GrantSort of is right-they let the money lapse before ruling on whether any of it was even legal.

MayaSo the case isn't decided, and the money's already gone?

GrantThat's where we're headed.

MayaPlus we're mapping the whole appropriations calendar-how many of the twelve funding bills have actually cleared both chambers?

GrantDo I have to worry about a shutdown yet?

MayaYou can already see your face on this one. Okay, walk me through how $4 billion just disappears.

GrantOkay, quick gut check before we go anywhere: On one Friday, roughly $5 billion in foreign aid Congress already approved just stopped existing.

MayaWow. Stopped existing. Like I opened my portfolio one morning and the position was just gone. Pretty much. NARFE put the number at $4.9 billion, and the freeze landed inside the last 45 days of the fiscal year. right when the clock runs out anyway.

GrantWait, wait, so the money didn't get vetoed, didn't get voted down, it just timed out?

MayaTimed out, and NBC News reported this exact move (a pocket rescission) hasn't been used in almost fifty years.

GrantBGHOST1hmm. Fifty years. And here's the part that makes my old finance brain itch. The guy running OMB, Russ Vought, has reportedly argued the law limiting this power is unconstitutional.

MayaRight, and CBPP reported on his position that way.

GrantBut he's still using that very law as the tool to kill the fund. Funds!

MayaWhich is either genius or just shameless, depending where you're sitting.

GrantI've watched sellers try that-argue the contracts invalid while still cashing the check.

MayaThat's the energy, exactly. And it's not a one-off. FY2027 funding runs out September 30th, there's a stopgap sitting in the Senate right now, and the same fight over who controls the money is running right alongside it.

GrantSo if an actual law can get walked around by a calendar, what's stopping this from happening every single year? Okay, building on that dollar figure, walk me through how this clock actually works.

MayaCongress appropriates money with an expiration date. The president can send a rescission special message asking to cancel part of it.

GrantAnd then?

MayaSection 1012B of the Impoundment Control Act freezes that money for 45 days while Congress decides.

GrantForty-five days, that's not nothing.

MayaNormally it isn't, but send that message with fewer than 45 days left in the fiscal year...

GrantAnd the clock runs out the back door.

MayaExactly. The appropriation expires before Congress ever votes. This isn't really a legal theory. It's a timing trick.

GrantSo the program doesn't get voted away, it just runs out of runway.

MayaThat's the whole move. In my old deal world, we called it running the clock. You don't need the other side to say yes. You just need them to run out of time to say no.

GrantSo OMB's basically closing on a house before the seller even knows there's a contract.

MayaKind of. Whoever controls the calendar controls the outcome.

GrantAnd GAO's not buying the timing trick at all. Their own explainer is blunt: "A pocket rescission is illegal, full stop.

MayaRight. GAO says funds proposed for rescission have to be released for obligation before

Speaker 3the end of the fiscal year.

Mayabefore they expire, no matter when the message lands.

GrantWait, so GAO's rule book and the administration read the same forty-five days completely differently.

MayaCompletely. There's a name behind the other read—Mark Paoletta, OMB's general counsel. EPIC for America's explainer lays his argument out:

GrantWhich is?

MayaThat nothing in the statute's text says how late in the fiscal year you're allowed to propose. To propose a rescission.

GrantSo it's a 'the law doesn't technically forbid it' argument.

MayaPretty much a different read of one sentence written half a century ago.

GrantGosh, if the text is actually silent on timing, that's not a small gap.

MayaSmall enough to still push real money out the door.

GrantFair—which funny enough takes us straight back to why that sentence exists in the first place, nineteen seventy-four. So flip back the clock. This whole forty-five-day gap exists because of one guy, Nixon.

Speaker 4Oh, I love a Nixon detour. Go.

GrantIn the early 70s, he just refused to spend money Congress had already approved—highways, water projects, all of it. Courts smacked him down repeatedly.

Speaker 4And Congress got tired of losing that fight in court every time.

GrantExactly. So in '74, they wrote the Impoundment Control Act. Control Act, the law we've been talking about all episode-specifically so a president couldn't just sit on funds and let them die.

Speaker 4Which is kind of hilarious, because that's the exact move happening again right now.

GrantDryly: Fifty years later, same trick, new paperwork.

Speaker 4Okay, but here's my problem: a law only matters if someone treats it like it matters.

GrantI'll push back on that a little. The Library of Congress's CRS

Speaker 5Its own legal analysis-the CRS side bar on this makes a sharp constitutional point-they compare pocket rescissions to the line item veto law the Supreme Court killed in Clinton v. City of New York.

Speaker 4Wait, the actual line item veto, that got struck down?

Speaker 5Ninety-eight, unanimous-ish; the theory is the same, letting a President cancel spending Congress already locked Locked in without Congress voting again is rewriting law without lawmakers.

Speaker 4So the argument isn't just, this is rude, it's, this is structurally the same thing the court already killed.

Speaker 5Right, that's OMB's actual legal problem here.

Speaker 4Okay, so what's their comeback?

GrantBecause they clearly have one.

MayaTheir comeback is clever: they say no law is being repealed at all-the money just "expires" naturally by the calendar.

GrantOh, come on-that's just relabeling the same move.

MayaMaybe; but legally it's a different question, expiration versus repeal; that distinction is the whole fight.

GrantSo we've got a law built to stop Nixon and the guy running the plane now says the law doesn't even apply to what he's doing.

MayaWhich means the fifty-year fix only works if somebody enforces it.

GrantAnd that, get this, is exactly where it got tested for real. There was a Supreme Court order on this, a real one.

MayaYeah, let's get into what the justices actually did with it.

Speaker 4Yep.

GrantOkay, so courts, Congress, somebody's got to be able to slam the brakes here, right?

Speaker 4You'd think. But look at what actually happened in court, because it's not encouraging.

GrantWait, this already went to a judge?

Speaker 4Last September, a district court ordered the money obligated. Then the Supreme Court stepped in, six to three, and stayed that mandate.

GrantSo the judge says pay it and the Supreme Court says wait?

Speaker 4Wait. And while everyone waited, the funding window closed. Closed, the money just expired mid appeal!

GrantSo the case went moot before anyone ruled on whether the freeze was even legal.

Speaker 4That's the trap. The court's own order said as much-this wasn't a ruling on the merits.

GrantMm-hmm. Okay, so nobody officially blessed the pocket rescission.

Speaker 4Nobody condemned it either-Justice Kagan dissented, joined by Sotomayor and Jackson per ABC News, calling this uncharted territory with real stakes.

GrantThree justices basically waving a flag saying nobody knows the rules here.

Speaker 4Right; and the majority leaned on standing, whether these plaintiffs could even sue, and whether the Impoundment Control Act blocks that kind of suit entirely.

GrantSo they lost on procedure-not the actual fight.

Speaker 4Procedure, whether a president can just let appropriated money run the clock, still open.

GrantFrustrating. What about GAO? They've been the loudest voice calling this illegal.

Speaker 4They have. GAO's own guidance spells out exactly why a pocket rescission is unlawful, and they've issued findings saying so.

GrantAnd they've flagged fund freezes like this before-more than once.

Speaker 4Repeatedly, same statute, same conclusion every time. Congress never built a way to force the executive to actually listen.

GrantSo GAO is the referee.

Speaker 4A referee with a whistle and no hands, GAO can write the finding; it cannot move one dollar into an account.

GrantAn audit finding is not a payment.

Speaker 4That sentence is the whole problem. You can be completely right on paper and still lose the money.

GrantSo Congress writes the check, GAO writes the reality check, and the money's already gone.

Speaker 4Pretty much. The nineteen seventy four law assumed good faith compliance. It never built in a way to enforce it when that faith breaks.

GrantSo the two groups most certain this is illegal—GAO appropriators from both parties—have no lever to actually pull.

Speaker 4None, which shoves everything back on to Congress' own calendar.

GrantAnd that calendar is already screaming. September thirtieth is bearing down fast.

Speaker 4Okay, forget the court room for a second. Let's talk calendar math.

GrantOh, the calendar's worse. As of July one, FedTools had a track; House passed two of twelve appropriations bills; Senate, zero.

Speaker 4Two out of twelve?

GrantAnd no top line three zero two a number either chambers agreed to. They're not fighting over numbers yet; there aren't any.

Speaker 4Right, you can't cut a deal when nobody's set the size of the pie.

GrantBut, plot twist, the House did move. July twenty first, clean C.R., H.R. nine seven seven zero, funding push to December fourth.

Speaker 4Two hundred and twenty to two hundred and five.

GrantSix Democrats crossed over. Roll Call reported Republicans framed it as pulling the shutdown threat off the table before fall.

Speaker 4Off the table for two months.

GrantFair. It's sitting in the Senate right now. Nothing. A thing signed.

Speaker 4So September thirtieth is still live.

GrantVery live. And here's the number that actually hits paychecks. Fedtools counted three funding lapses for federal workers in 12 months, 123 days combined, including the 76-day DHS shutdown that ended April thirtieth.

Speaker 4Seventy six days.

GrantBack pay is guaranteed once a lapse ends, but Once it ends is doing a lot of work there.

Speaker 4That's the negotiation problem right there. Why would anyone trust a dollar figure in a bill if the money can be pulled forty five days later?

GrantLike we just watched with the foreign aid.

Speaker 4Exactly. You sign a deal, the other side keeps a move to unwind it after the fact. I wouldn't sign that on a car, let alone a federal budget.

GrantThe Senate Democrats' version of the CR actually tried to fix that. Language extending the availability of funds OMB was withholding. was withholding.

Speaker 4Which means appropriators already know their leverage problem. They're writing defense clauses into their own spending bills.

GrantAnd whether any of that actually holds up -- GAO, committee pushback, the lawsuits -- that's the scorecard coming next. Picking up on that, let's grade the referees on this one.

Speaker 5GAO call the freeze illegal within days. Clean legal opinion,

GrantMm hmm.

Speaker 5zero enforcement power. Pass on the call, fail on follow through.

GrantAnd appropriators from both parties are furious, Republicans included. That's the piece that feels real to me.

Speaker 5Real, sure, but did the anger move one dollar back to the aid accounts?

GrantNo. So I'm closer to no check, loud noise, nothing recovered.

Speaker 5Well, I'd call it Check with conditions. There's an actual statutory fix on the table.

GrantGo on.

Speaker 5Congressional researchers have floated amending Section 1022b directly, require withheld funds to release with enough runway to actually get

Speaker 4Right.

Speaker 5obligated. That kills the Pocket Rescission move outright.

GrantWait, that would just close the loophole?

Speaker 5On Paper. Or Congress could record anything proposed for Rescission as obligated the second is proposed. Either version works.

GrantPapers is doing a lot of work in that sentence.

Speaker 5Fair; it only counts if Congress writes it into law instead of just yelling it what.

GrantSo here's what I'm watching: does the Senate vote on that December fourth CR before the thirtieth, or do we hit another lapse?

Speaker 5And do FY2027 ... Seven bills carry language stopping this move, or just another angry press release.

GrantMark September thirtieth; that's where we find out who actually has the power here. All right, Maya, check or no check on this pocket rescission mess?

MayaGAO is a check, fast, correct call, illegal, just zero enforcement muscle behind it.

GrantCourts are a no. That six three stay let the money expire before anyone ruled on the merits.

MayaThe program didn't get voted away, it just ran out of runway.

GrantAppropriators are furious, both parties. Real pressure, not one dollar recovered.

MayaSo overall, No check. Not yet.

GrantThe fix is right there, close that forty-five day window in the Impoundment Control Act

MayaWow.

Grantso OMB can't outrun the clock.

MayaWatch September thirtieth. Next funding fight tells us if Congress actually closes it, or just yells again.

GrantIf this made the mess make sense, send it to someone who'd care.

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GrantThanks for listening. Catch you next week.