The potential power of presidential budgets

On Tuesday, March 4, President Obama will release his budget.   Most observers consider the White House budget to be largely symbolic, since Congress has the sole authority to craft spending and tax bills.

But history shows how presidential leadership can be critical in forcing congressional leaders in both parties to align their tax and spending policies.

The federal government ramped up spending and taxation rapidly after the US entered World War I.  It had difficulty reducing spending and taxation after the war ended abruptly, 20 months after the declaration of war.   That led to a public backlash.   In response, Congress centralized its own control over spending and, in 1921,  required the president to submit a budget before each fiscal year.    In the 1920s conservative Republicans, such as Budget Director Charles Dawes and Treasury Secretary Andrew Mellon,  used that budget to pay  down debt by creating a surplus of revenues over spending.

During the next spike in debt, at the close of World War II,  Democratic President Truman submitted budgets that contained surpluses.    Republicans in Congress sought to reduce wartime taxes at a faster rate than the administration,   but the principle of a balanced budget forced them to specify spending cuts.   Then, as now, no one enjoyed paying taxes.  However,  a majority of voters were also concerned about excessive cuts in spending for national security or domestic programs.   By 1950 the “pay as you go” principle forced federal leaders in each party to forge a new consensus on the use of income and payroll taxes needed to fund the Pentagon and social insurance.

Today’s GOP leaders are quite vocal in criticizing the level of federal borrowing, but neither Republican nor Democratic leaders have proposed to balance the budget during the balance of President Obama’s term.     If the president himself did so,   congressional leaders in each party encounter greater pressure to bring their spending and tax policies more in line.