Direct Spending: A term defined in the Budget Enforcement Act of 1990 to include entitlement authority, the food stamp program, and budget authority provided in law other than appropriations acts. From the perspective of the appropriations process, all direct spending is classified as mandatory as opposed to discretionary spending. New direct spending is subject to pay-as-you-go requirements. Direct spending is synonymous with mandatory spending. (See Mandatory Spending and Entitlement.)

[The Congressional Budget Process: An Explanation, Appendix J (Glossary), Committee on the Budget of the U.S. Senate, S. Prt. 105-67 (Revised December 1998).]

Line Item Veto Act

Definition of Direct Spending (Line Item Veto Act)

The following explanation of the definition from  section 1026 of the Line Item Veto Act of 1996  (Part C of Title X of the Congressional Budget and Impoundment Control Act of 1974) was included in the Joint Explanatory Statement on the Line Item Veto Act:

(8) Item of New Direct Spending. The term “item of new direct spending” means a provision of law that results in an increase in budget authority or outlays relative to the baseline set forth pursuant to section 257 of the Balanced Budget and Emergency Deficit Control Act of 1985. Under the Balanced Budget and Emergency Deficit Control Act of 1985, a reauthorization or an extension of a major entitlement program would not result in an increase in direct spending. As a consequence, such legislation would not constitute an item of new direct spending pursuant to the conference report. This does not mean that legislation must result in a net increase in spending in order to be subject to this cancellation authority. A provision of a future law that increases direct spending would be subject to the President’s cancellation authority whether or not it is offset by another provision that reduces direct spending or increases revenues in the same law.

Unlike an appropriation law, which specifically designates a dollar amount for a specific program, direct spending can arise from a number of interactions among provisions in a new law, other provisions in that same new law, and underlying law. The conference report provides the President with the authority to cancel the legal obligation provided by the new law that results in new direct spending. The cancellation authority is limited to the specific provisions in the new law signed by the President that result in the legal obligation to expend funds and does not extend to other previously enacted laws.

The following are examples of direct spending increases that have been enacted. These examples are given to illustrate how cancellation authority could apply to similar items of new direct spending if included in a law to which part C of title X would apply. These examples are used solely for illustrative purposes and the conferees are in no way commenting on the merit of any of these programs. The conferees do not intend for these examples to represent all instances where cancellation authority may be used.

The 1995 Balanced Budget Act included provisions that increased direct spending, but this Act was vetoed in its entirety by the President using his Constitutional authority and thus no provisions of that Act would be subject to the cancellation authority under part C. In the Omnibus Budget Reconciliation Act of 1993, the Congress enacted provisions that led to a net reduction in direct spending of $78.8 billion over five years. While this law led to a net reduction in direct spending, it included several provisions that increased direct spending. More specifically, the following are selected examples of provisions that increased direct spending that illustrate how the President’s cancellation authority could be applied:

Section 13982 increased Forest Service payments and section 13983 increased Bureau of Land Management (BLM) payments to counties affected by the Northern Spotted Owl. These provisions were estimated to increase direct spending by $43 million in fiscal year 1994 and $215 million over the period of fiscal years, 1994-1998. The President could cancel the entire amount of the legal obligation created by section 13982 for the Forest Service to make payments or the entire amount of the legal obligation in section 13983 for BLM to make payments.

Sections 13811 through 13813 dealt with Customs overtime pay, additional benefits, and user fees. Section 13812(c) provided cash awards for foreign language proficiency to Customs Officers that was estimated to increase direct spending by $2 million in fiscal year 1994 and $10 million over the period of fiscal years 1994-1998. The President could cancel that legal obligation for the entire amount of funding provided for cash awards to Customs Officers. However, the President could not reach to provisions that reduced direct spending, such as the extension of Customs fees and overtime reform or other provisions that did not directly deal with an increase in direct spending.

Sections 13901 through 13971 of that law made a number of changes to the food stamp program that were estimated to lead to a net increase in direct spending of $56 million in fiscal year 1994 and $2.7 billion over the period of fiscal years 1994-1998. More specifically, section 13923 increased direct spending by raising the asset test and indexed this asset test for inflation for determining eligibility for food stamps. The President would have the authority to cancel the entire specific legal obligation so that the increase in the asset test would have no legal force or effect. In addition, the President could cancel the entire legal obligation to make the inflation adjustment so that this asset test would not be indexed for inflation. However, the President’s cancellation authority would not apply to provisions that did not affect direct spending or reduced direct spending, such as section 13951 that expedited claim collections and adjustments to error rate calculations.