The topic of this episode is, what are budget rescissions and pocket rescissions?
Rescissions have been in the news recently. This past July President Donald J. Trump sent the House and Senate a rescissions message. This memorandum requested that Congress rescind, or take back, spending authority it had previously granted. Congress passed the legislation, which cut $9 billion from foreign aid, the U.S. Institute for Peace, and the Corporation for Public Broadcasting. A rescission of funds has not occurred since 1999, when former President Bill Clinton, a Democrat, struck a deal with the Republican-held House and Senate.
Now the Trump administration is attempting a maneuver called a “pocket rescission.” What’s a pocket rescission?
To answer that question I have as my guest my colleague, Dr. Philip Wallach. He is a senior fellow at the American Enterprise Institute. He is a colleague and a friend. At AEI he studies America’s separation of powers, with a focus on regulatory policy issues and the relationship between Congress and the administrative state. His latest book is Why Congress (Oxford University Press).
Kevin Kosar:
Welcome to Understanding Congress, a podcast about the first branch of government. Congress is a notoriously complex institution, and few Americans think well of it. But Congress is essential to our republic. It is a place where our pluralistic society is supposed to work out its differences and come to agreement about what our laws should be.
And that is why we are here: to discuss our national legislature and to think about ways to upgrade it so it can better serve our nation. I am your host, Kevin Kosar, and I’m a resident scholar at the American Enterprise Institute, a think tank in Washington DC.
Phil, welcome to the program.
Philip Wallach:
Great to be with you.
Kevin Kosar:
In order to help us understand recissions and pocket rescissions, let’s start first with something more basic: the Constitution. What does the US Constitution say about federal government spending?
Philip Wallach:
The most important thing that it says is that, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” That means spending in the federal government happens as a consequence of laws duly passed through Congress and signed by the president in the normal course of things.
That is a pretty basic foundational fact. The spending power is not articulated exactly in that way, but Congress has the power to lay and collect taxes, to pay the debts, and provide for the common defense and general welfare of the United States. So the combination of those things makes it pretty clear that spending happens through decisions made by Congress.
Kevin Kosar:
And there is nothing in Article One or Article Two of the Constitution that says that the president had any sort of discretionary authority over the particulars of spending. Rather, all he has got is a veto; if he does not like an appropriation bill sent to him—according to the Constitution, at least—he can veto it or he can sign it. Those are the choices, right?
Philip Wallach:
Yes, I think that is fair. Of course, some in the White House right now believe the president has some more authorities that are basically implied by the fact of being the executive and being the one who’s actually administering these monies.
They say that being close to the ground gives the President all kinds of responsibilities and powers that do not need to be spelled out exactly, but they are certainly not to be found anywhere clearly in the document.
Kevin Kosar:
And for listeners who want to dive more deeply into this, there is a whole body of what you could call case law that the Government Accountability Office has issued in its so-called Red Book, also known as Principles of Federal Appropriations Law, which lays out all the instances where they basically judge that it is okay if a president does not spend every penny that Congress appropriates for a particular purpose. If, for example, Congress appropriates $100 million to build a bridge, and it turns out it only costs $95 million, the president is not obliged to just give that extra $5 million away to some contractor in order to meet the letter of the law.
So that case law does provide instances where the GAO outlines some reasons for why a president should be allowed some discretion in these areas, and there is a whole lot more than that. But moving on from the Constitution, which clearly does not lay out a full fledged budget process—it is really quite spartan—we do have on the books a federal budget law: the Congressional Budget and Impoundment Control Act, which was passed way back in 1974. And it is there that we find this process known as a rescission.
So, Phil, what is a rescission and, and how does this process work?
Philip Wallach:
It is pretty important to understand the context that that 1974 law came from, which was President Richard Nixon making very aggressive use of an impoundment power that he said was implied by the Constitution and inherent in the office of the presidency, where he basically said that Congress gets to instruct spending up to a certain amount, but I can spend less than that because I am the president, and I can do that even if I think it is just because it is a bad idea. That was a historically unique assertion by Nixon that he had such a far reaching power to decline to spend money and Congress fought over that.
The Supreme Court ruled that Nixon’s impoundments were illegal, but Congress also wanted to set up a new structure that would make themselves more authoritative and assertive in setting out the budget. So they created the Congressional Budget Committees, they created the Congressional Budget Office, and they tried to make it clear that they did not want to see any further impoundments. Instead, they gave the president a new tool, which was the rescission tool, which is a procedure by which the president can request to send back monies that Congress had previously appropriated—to rescind them back to the United States Treasury.
And the way the law works, it not only gives the President the power to make such a request, it also sort of dictates some of the floor procedures in both the House and the Senate for considering those requests, including effectively exempting such requests from any Senate filibuster.
That rescission power has only been used sporadically. It has been used many times, but many more rescission requests have been made than granted over the years, and in recent years it has not gotten a lot of successful use. But we did have a successful rescissions package of $9 billion earlier in 2025 and it looks like the Trump administration will be making a lot more rescissions requests going forward.
Kevin Kosar:
I was trying to figure out when was the last time a successful rescission had occurred before the more recent one in July, and it looked to me like it was way back in the era of Bill Clinton back when President Clinton cut a deal with the Republican-controlled Congress.
Do I have my history right here? And second, why are rescissions rare in this modern era?
Philip Wallach:
First of all, we have to distinguish between the rescissions made through this special process—laid out in the ICA—and rescissions made on a more routine basis included in regular appropriations laws. There are a lot more of those. As you were saying before, if you do not spend up to 100 percent of an appropriated amount, that will leave you with a little bit of an administrative challenge, but we are not hard pressed to deal with those on a routine basis. We just put in a provision in the law to say this little bit of money left over is rescinded. That is a fairly routine matter, but these presidential requests seem to be disfavored, in part because they are so jarringly separate from the normal appropriation cycle.
We are pretty much always in an appropriation cycle. We do it every year, so as soon as you finish one year, you start the process up for the next year. In some ways, it is more natural for the president to just look after their priorities in the course of that normal cycle. Of course, that has been an overwhelmingly bipartisan process, even in our very partisan age, so I think the more natural course has been to make this a part of regular appropriations negotiation.
Now, this year we are running on a full year continuing resolution, meaning we did not negotiate a new set of spending levels for fiscal year 2025; we just kept the fiscal year 2024 levels with a few adjustments. That arguably creates more of a need to do an off-cycle rescissions package as the president sought and achieved. On the other hand, given just how testy the relations are between Democrats and Republicans are right now, the prospect of lots more out of cycle rescissions makes Democrats very wary of entering into a normal deal because they say: how are we gonna bargain over a normal deal if we think that you’re going to then use this rescissions procedure to go around the filibuster requirement in the Senate to essentially renege on our bipartisan deal in some of the ways that would be most important to us.
That is the complication.
Kevin Kosar:
Let’s now move on to this thing called a pocket rescission, which is creating quite a bit of controversy. What is a pocket rescission?
And before you answer, let me mention to members of the audience here that you recently published an excellent piece titled, “Pocket Rescissions: Legal Controversy and Political Meaning” and listeners can find a link to it in the show notes, or you can find it on the Understanding Congress website under the Blog Section.
So Phil, what is a pocket rescission?
Philip Wallach:
A pocket rescission is in some way a normal rescission request, but it is coupled with an expiration of funding, and timed in such a way that the practical effect of it is very much like an impoundment.
The president and the Office of Management and Budget right now are claiming that when they make a rescission request within 45 days of funding expiration—which is written into statute—that the Impoundment Control Act’s rescission procedure gives them the ability to kind of put that money in limbo for 45 days, while Congress would normally have the chance to give its approval to that rescission and make it permanent. Normally, if Congress does not act, then the rescission request fails and the money has to be spent.
Now because of the timing of these pocket rescissions, the OMB now is claiming that if Congress fails to act, the money will have expired by the time the limbo period ends, so the money will be sent back to the Treasury. What they are saying is because of this limbo period, which is part of the statute, the Impoundment Control Act allows them to change the default outcome, and that is very important because now instead of needing congressional action to make this rescission effective, you change it to just needing to make the request and have Congress not act.
Kevin Kosar:
Let me start with just getting clear on the facts of what the Trump administration is arguing and attempting.
The message—that is, basically the pocket rescission message—was drafted and sent over to Congress on August 29, 2025, which—if I am reading my calendar right—is 32/33 days before the fiscal year ends. Do I have that right?
Philip Wallach:
That sounds
They arguing that this is legit, which is an interesting argument.
Our friend James Wallner, who we both worked with formerly and is now at the Foundation for American Innovation, points out that nothing in the Impoundment Control Act statute prevents explicitly a president from submitting a request right until the last day of the fiscal year.
Does it? Is that just an ambiguity in the statute?
Philip Wallach:
There definitely is nothing in the statute that explicitly rejects the possibility. That is true, and maybe that is an unfortunate omission from the statute because it really does not seem like very good procedure. On the other hand, it is not really clear when you read the totality of the statute that this procedure ought to be read as being able to change the default posture. The Impoundment Control Act has some general language that makes it very clear that it is not trying to facilitate impoundments. It is not trying to stop legal obligations of spending. Quite to the contrary, it is trying to make sure that those are honored. And so, I believe GAO’s reading of the statute now—and for many years now—has been that you could make the request, but that does not actually relieve you from spending the money. The only way you actually get the rescission to happen is by a congressional vote affirming it, and if you run up against the deadline for spending the money while your request is pending, then the request is null and void; you just have to spend it.
That is the nub of the conflict right now. The legal interpretive conflict is that GAO says, when you read the whole statute, it is clear that you are not supposed to be essentially getting an impoundment power out of it, while OMB and their sympathizers say that it looks like this limbo period is part of the law and built into it, and we are taking advantage of it in a way that the statute does not explicitly prevent.
Kevin Kosar:
And I think the administration has been rather clever here on two counts. First they could have waited to send this rescission message on the afternoon of September 30, 2025, right as the clock on the fiscal year is expiring, but they did not do that. Instead, they—
Philip Wallach:
Well, they may send more.
Kevin Kosar:
This is true. They may send more. And the second thing is that the spending that they are targeting is foreign aid related. My sense is that they think the Constitution gives the president special authorities in the area of foreign affairs, and since this spending falls within that realm, this strengthens their argument that the president has got some discretion here, as opposed to this being purely domestic spending. There is a lot of constitutional law doctrine that adds to this idea that the president is the first voice of sorts in foreign affairs.
Philip Wallach:
I am not sure that they are making much use of that. I think the foreign affairs is chosen because the American public has always been deeply unsympathetic to foreign aid money—
Kevin Kosar:
Oh, absolutely.
Philip Wallach:
And so politically that makes it strong ground for them to pick a fight on.
But in terms of any kind of inherent constitutional authority not to spend, I would say that is different from the pocket rescission procedure that they are now utilizing. The head of the OMB, Russ Vought, and his general counsel over there, Mark Paoletta, have both made it clear that they believe that the Impoundment Control Act is unconstitutional. They believe there is an inherent impoundment power reserved to the president, so they believe some pretty far reaching things there, but they have not come out and asserted that directly to this point.
At the time we are recording, in mid-September 2025, the Trump Administration has never simply said, we have an inherent impoundment power. Instead, they are using this procedure and saying, we are just making good use of statutory procedures that Congress itself has put in place. So in that respect, they are admitting that if Congress were to change the law, they would not have this option. They are saying this is just a feature of the US code as it currently exists.
If they were making a sort of inherent constitutional claim, that that would be different.
Kevin Kosar:
I would think that the inherent constitutional claim could come down the road in a legal challenge that arises. So you look at their rescission message to Congress, which says, we are using this Impoundment Control Act authority to request this rescission to do this pocket veto thing. I am sure at some point in time, if this is successful, someone will file a lawsuit and the courts will have to judge it on the basis of whether or not this is a faithful interpretation of the ICA.
Then the question is whether or not ultimately it could be appealed up to the Supreme Court on a more constitutional basis to get a ruling on whether or not the Impoundment Control Act is constitutional or not in this respect, which like you said, Russ Vought and Mark Paoletta both believe that this law is unconstitutional and they would be delighted if the Court was able to strike down the provisions that they found objectionable.
Philip Wallach:
For what it’s worth, I do not think they like their chances in court very much. There really is not a lot of constitutional law on their side. The Nixon-era cases slapped Nixon down in the most emphatic terms you can imagine. There was the whole line item veto debate in the 1990s. This was a case where Congress through a statute tried to give the president the power to strike particular spending items on a selective basis, and the Supreme Court rules that unconstitutional. They said that Congress did not have the ability to reshape the way spending functions in that way. The Constitution prescribes that appropriations made by law are law and the president does not get to just change the law because Congress tried to give him that power.
Even the dissent in that case expressed no real sympathy for the principle that there is an inherent impoundment authority in the executive. It instead argued that the president does have this power because Congress made good law giving him the power.
Were they to litigate out the constitutional challenge, there is a pretty good chance that the Court would rule against the presidency.
Kevin Kosar:
And to underscore an earlier point, the whole point of the Budget and Impoundment Control Act for Congress was to stop a president from just unilaterally deciding not to spend funds because he thinks it is foolish or unwise, or because he does not feel like it. But a pocket rescission kind of creates an impoundment.
How do you think this pocket rescission is gonna play out? Do you think Congress will just let it slide by and then reauthorize the funds in a continuing resolution or further appropriations act? Do you think there is going to be a fight over it?
Philip Wallach:
I think that it does not make sense to remove the pocket rescissions question from the larger question of what is going to happen with congressional appropriations. Right now we are at an impasse where it seems like the whole appropriations process has seized up and ground to a halt.
They are certainly in motion trying to make it work there. There are some people on Capitol Hill doing their best and there are some indications that we might get a few of the provisions passed into law this month. But on a larger basis, there seems to be a sense that we are just not sure if we can keep doing bipartisan lawmaking of any kind. And certainly it is hard to understand why Democrats would make themselves a party to any kind of spending deal that does not prevent the administration from unilaterally changing things around at their own whim. So I think if we can get to some kind of bipartisan deal, it needs to have some kind of solution to pocket rescissions.
It is important to note: one solution is just spend the money again. The pocket rescission relied on an expiration date. Congress can re-up that money without an expiration date or with a whole lot more instructions about exactly when it is to be spent. Congress could really do quite a lot more to manage the flow of funds. It has given the executive branch lots of flexibility, in part because it expected there to be a continuing good faith dialogue between the branches. That can happen at a more informal level, but if that breaks down, then Congress can try to control more things through provisions that they write into the statutes themselves.
I hope that that is ultimately what is going to happen, but I do think there is some chance that we are going to see Republicans just passing more continuing resolutions and assuming that they will make adjustments through the executive branch. That is looking like a live possibility today in a way that I would have been quite surprised by, even a year ago.
Kevin Kosar:
It certainly has become an attractive partisan pathway for policymaking.
Alright. It is going to be an interesting autumn, but unfortunately, we are out of time. Dr. Philip Wallach, Senior Fellow at the American Enterprise Institute and frequent guest on this podcast, thank you for helping us better understand what a rescission is and what a pocket rescission is.
Philip Wallach:
Thanks for having me, Kevin.
Kevin Kosar:
Thank you for listening to Understanding Congress, a podcast of the American Enterprise Institute. This program was produced by Jaehun Lee and hosted by Kevin Kosar. You can subscribe to Understanding Congress via Stitcher, iTunes, Google Podcasts, and TuneIn. We hope you will share this podcast with others and tell us what you think about it by posting your thoughts and questions on Twitter and tagging at AEI. Once again, thank you for listening, and have a great day.
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