Trump’s Plans to Withdraw Funds from State Department and USAID

Last Thursday, President Trump informed President Johnson of his plan to save taxpayers around $5 billion by pulling back unspent funds allocated to the State Department and USAID.

Wade Miller, from the Center Renewing America, laid out key points in what he calls the “Primer: Pocket Retraction Strategy to Cut Spending.” This strategy involves the Water Storage Management Act of 1974, also referred to as the ICA. Through this act, the President can send a special message to Congress outlining the cuts he proposes, along with his reasons and specific financial details. This process allows him to flag spending he considers unnecessary, which then triggers a 45-day review period.

Once this is in motion, it’s up to Congress to respond. Both the House and Senate need to approve the President’s withdrawal request within those 45 days (measured in Congressional sessions, not calendar days). If either body doesn’t act or votes against the proposal, the funds automatically remain allocated as originally planned by Congress. Conversely, if both chambers agree within that timeframe, the funds get withdrawn, and the money remains untouched.

But there’s a crucial caveat: if the fiscal year ends during the 45-day window and Congress doesn’t take action to block the proposed rescissions, the budget authority lapses, resulting in the loss of unspent funds.

This explains why many recipients of federal payments often seem to splurge on new items like phones and computers toward the end of September, as the fiscal year draws to a close.

To summarize, if an agency is close to the end of the fiscal year and has leftover funds, the President can propose withdrawing some or all of those funds just before the year ends. This “Pocket” revocation mechanism has been established.

It’s important to highlight that the ICA doesn’t set restrictions on when the President can submit a withdrawal request to Congress.

The situation is straightforward. If an agency opts to use this process, making retractions with less than 45 days left in the fiscal year is legally permissible.

Miller references historical examples, noting that shortly after the ICA was enacted in 1974, President Ford submitted proposals to Congress right before the fiscal year concluded. In a December 1975 letter, the Government Accountability Office confirmed that two proposed rescissions totaling $10 million had lapsed and provided detailed insights into the budgetary intricacies of Ford’s late withdrawal request. GAO criticized this pocket withdrawal procedure as a “major flaw” and suggested corrections to Congressional leaders.

Some critics, such as those from the Budget and Policy Priority Center, have labeled it as a “major flaw.” Yet even GAO acknowledges it’s a legislative issue rather than a misuse of authority. Congress has spent decades trying to close this so-called loophole, but discussions on this issue are often scarce.

To clarify, pocket withdrawals aren’t an arbitrary exercise of power; instead, they reflect underutilized provisions of the ICA. Just because Ford didn’t exercise this authority since his presidency doesn’t exclude Trump’s ability to do so now. It may, however, have fallen a bit out of practice.

Using pocket retraction is undoubtedly a politically charged choice, but it also aims to address rampant agency spending. In a climate of extensive expenditures, pocket withdrawals remain one of the few effective tools left.

It’s essential to restore fiscal responsibility. If Congress fails to act, President Trump has the right to step in and use this legal and prudent pocket retraction strategy, something expected from financially accountable leaders.