Sparring over spending

SUMMARY: Republicans love the line-item veto, and that's been a problem for Rudy Giuliani, who sued to kill it when he was mayor of New York.

To hear Mitt Romney tell the story, Rudy Giuliani single-handedly got the line-item veto declared unconstitutional, allowing Congress to spend hundreds of billions of dollars wildly each year while the president sits helpless to stop it.

But Romney, Giuliani's fellow Republican presidential candidate, is overstating both Giuliani's role in the legal challenge to the veto and, according to several budget experts, the effectiveness of the line-item veto in controlling spending.

After decades of fighting over whether Congress should grant the president such a broad power, the House and Senate finally passed the line-item veto in 1996. President Clinton used it somewhat sparingly. The law called for an expedited procedure under which courts would have to rule on the veto's constitutionality quickly.

Among Clinton's vetoes was a provision in a budget bill that would have provided New York City with as much as $2.6-billion in Medicaid funds. Then-Mayor Giuliani was one of several people or groups that filed suit in U.S. District Court in Washington, D.C., challenging the line-item veto's constitutionality. Also filing suit were two labor unions and the Greater New York Hospital Association. The Snake River Potato Growers in Idaho also challenged the law over a tax benefit provision that Clinton had vetoed.

"The president's use of the line-item veto in this instance is detrimental to the efforts of the city and its health care partners — the city's public and voluntary hospitals and their employees — to provide maximum health care benefits to needy individuals," Giuliani said at the time.

Clinton said he vetoed the provision because it only benefited New York. Giuliani responded that, with the veto, New York received a lower percentage of Medicaid reimbursement than most other states.

Giuliani and his partners in the suit also argued that the president, under the Constitution, only has three choices when it comes to legislation: sign it, veto it, or allow it to become law without his signature. He cannot, they argued, veto pieces of a bill.

On June 25, 1998, the Supreme Court agreed, ruling 6-3 that the president must sign an entire bill or veto it.

"The decision by the U.S. Supreme Court is a great victory for the people of the city, the state and for the Constitution of the United States," Giuliani said at the time. "I want to reiterate my strong support for the concept of the presidential line-item veto, but it was clear that the specific statute under which it was created was unconstitutional."

Romney has been hammering Giuliani on the line-item veto, contending that his Supreme Court challenge demonstrates that he was more interested in keeping the city's special-interest tax break than he was in making sure the president has an effective tool to control spending.

It's obviously true that Giuliani sued the federal government and he has said he did so — in part — because of his interpretation of the Constitution. However, during an Oct. 9, 2007, debate sponsored by CNBC, MSNBC and the Wall Street Journal , Giuliani also said, "As mayor of New York, if I had let President Clinton take $250-million away from the people of my city illegally and unconstitutionally, I wouldn't have been much of a mayor."

Giuliani has proposed amending the Constitution to allow the president to veto "wasteful special interest programs without contributing to gridlock by vetoing an otherwise sound bill," according to his campaign's Web site.

Romney has argued that the line-item veto is extremely effective, adding that he used it more than 800 times as governor. After that same Oct. 9 debate, Romney said he agreed with fellow GOP presidential candidate Sen. John McCain, R-Ariz., a firm supporter of the veto. "The line-item veto is the best tool the president has to rein in excessive spending."

Budget researchers are split on that issue. President Clinton had the power from Jan. 1, 1997, to June 1998. He used it to cancel 82 spending items, which would have saved less than $600-million between 1998 and 2002, according to the Congressional Budget Office. By comparison, total spending and revenues in 1998 were about $1.7-trillion.

In March 2006, then-CBO acting director Donald B. Marron testified before a House subcommittee that any savings that Congress would get from a more limited line-item veto would have to be measured against possible drawbacks, including a shift of power from Congress to the president.

In a May 2005 report, Louis Fisher, a senior specialist at the Congressional Research Service, said the line-item veto could actually increase spending. "The administration might agree to withhold the use of an item veto for a particular program if members of Congress agreed to support a spending program initiated by the president," Fisher said in his report.

He went on to quote several budget experts who said the line-item veto would have a limited impact. "An item veto might produce a few billion dollars in savings in a fiscal year, but could quite possibly increase spending," Fisher concluded.

In any event, a return to the Clinton-era line-item veto would require a constitutional amendment and a lengthy process. Several Republicans have proposed a different version, allowing the president to propose rescinding spending on a particular program, which Congress could then approve or reject.

Such a plan could restrain spending, according to Brian Riedl, a fellow at the conservative Heritage Foundation in Washington.