Last Thursday, President Trump informed President Johnson of his aim to save taxpayers around $5 billion by retracting funds designated for the State Department and USAID that haven’t been used yet.
Wade Miller from the Center Renewing America outlined significant points regarding this in his “Primer: Pocket Retraction Strategy to Cut Spending.” The Water Storage Management Act of 1974, also known as the ICA, allows the President to submit a special message to Congress, detailing why certain spending is deemed unnecessary. This triggers a rapid 45-day review process.
From there, it’s up to Congress. Both the House and Senate must approve the retraction within 45 days – which is counted from the session days, not calendar days. If only one chamber approves, or neither acts, the funds will be used as Congress initially intended. However, if both chambers agree within that timeframe, the money will not be allocated.
But there’s an important catch: if the fiscal year ends during those 45 days and Congress hasn’t taken action against the proposed cuts, budget authority lapses, leading to a loss of unallocated funds.
This is why many individuals receiving federal payments often acquire new phones and gadgets right before September ends—just before the fiscal year concludes.
To summarize, if a federal agency reaches the tail end of the fiscal year with unused funds, the President can propose cuts just days before it concludes. This is what’s known as the “Pocket” retraction.
Notably, the ICA imposes no restriction on when the President can submit requests for funds withdrawal to Congress.
The situation is straightforward. “If an agency opts for this route, executing retractions with less than 45 days remaining in the fiscal year is both legal and constitutionally valid.”
Miller draws on historical examples, noting that shortly after the ICA’s establishment in 1974, President Ford made a similar proposal as the fiscal year closed. In December 1975, the Government Accountability Office confirmed that two proposed rescissions totaling $10 million had expired and detailed the budgetary complexities of Ford’s last-minute request. GAO considered the wording in the ICA regarding pocket withdrawals to be a significant flaw and offered suggestions to rectify this to congressional leaders.
Critics, including those at the Budget and Policy Priority Center, label this as a “major flaw.” However, even the GAO acknowledges it as a legislative gap rather than an executive overreach. For decades, Congress has attempted to close what they see as a loophole.
It’s essential to understand that pocket retraction isn’t an unchecked power; rather, it’s a frequently overlooked provision within the ICA. Just because no president has utilized it since Ford doesn’t mean Trump lacks the authority to do so now. Sure, it might feel a tad rusty.
Implementing pocket retraction might be politically audacious, yet it promises to help drain the swamp. Amid substantial agency spending, it stands as one of the few tools left for fiscal discipline.
In essence, if Congress remains inactive, President Trump has the legal and prudent means to act. Utilizing pocket retraction aligns with the expectations of those advocating for financial responsibility.
