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This refers to a refusal by the President, for whatever reason, to spend funds made available by Congress. It is the failure to spend or obligate budget authority of any type (Notes: Impoundment of Funds, 86 Harvard Law Review 1505 ).
ARGUMENT AGAINST EXECUTIVE IMPOUNDMENT:
Those who deny to the President the power to impound argue that once Congress has set aside the fund for a specific purpose in an appropriations act, it becomes mandatory on the part of the President to implement the project and to spend the money appropriated therefor. The President has no discretion on the matter, for the Constitution imposes on him the duty to faithfully execute the laws.
ARGUMENT FOR EXECUTIVE IMPOUNDMENT:
Proponents of impoundment have invoked at least three principal sources of the authority of the President. Foremost is the authority to impound given to him either expressly or impliedly by Congress. Second is the executive power drawn from the President’s role as Commander-in-Chief. Third is the Faithful Execution Clause.
The proponents insist that a faithful execution of the laws requires that the President desist from implementing the law if doing so would prejudice public interest. An example given is when through efficient and prudent management of a project, substantial savings are made. In such a case, it is sheer folly to expect the President to spend the entire amount budgeted in the law.
Note: In the General Appropriations Act, impoundment of funds is not allowed except if there will be an unmanageable national government budget deficit.