PayGo: Remove the clause allowed to ignore it.

[Thiebear]

President Barack Obama is hailing pay-as-you-go budget legislation he signed Friday night as one in a series of crucial steps needed to snap Washington out of a destructive pattern of overspending.

“Now, Congress will have to pay for what it spends, just like everybody else,” Obama said in his radio and Internet address released Saturday morning. “After a decade of profligacy, the American people are tired of politicians who talk the talk but don’t walk the walk when it comes to fiscal responsibility. It’s easy to get up in front of the cameras and rant against exploding deficits. What’s hard is actually getting deficits under control. But that’s what we must do.”

http://www.ombwatch.org/node/10259

House Passes Statutory PAYGO Bill

Posted on July 29, 2009 The House passed legislation (H.R. 2920) on July 22 that would reinstate statutory "pay-as-you-go" (PAYGO) budgeting rules, which were allowed to expire in 2002.

The bill was championed by Majority Leader Steny Hoyer (D-MD) and was largely based on language developed by President Obama. Despite criticism from key Republican leaders, the bill attracted 24 Republican votes and passed by a large margin (265-166). The bill now moves to the Senate, where it may face obstacles, particularly the lack of support from Senate Budget Committee Chairman Kent Conrad (D-ND).

Since Congress allowed statutory PAYGO rules to lapse, a number of expensive fiscal policies, such as the 2001 and 2003 Bush tax cuts and the Medicare prescription benefit, were approved in Congress, substantially adding to the national debt. These policies, combined with the economic instability of the past two years and massive spending initiated to help jumpstart the economy, have pushed the federal government deeply into the red. The result has been an increase in public demand to restore fiscal responsibility in government budget and tax policies.

PAYGO rules were first created as part of the Budget Enforcement Act of 1990 to help control deficit spending by requiring any proposed new mandatory spending or tax cuts to be "paid for" with reduced spending or tax increases elsewhere in the federal budget.

Under the House-passed bill, the Office of Management and Budget (OMB) would tally at the end of the calendar year the sum total of legislation enacted into law and whether it equaled a surplus or a deficit over five- and ten-year budget windows. This is called the PAYGO scorecard. If the PAYGO scorecard was out of balance at the end of the year in either the five- or ten-year budget window, OMB would institute automatic across-the-board reductions to program spending, known as sequestration.

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http://www.heritage.org/Research/Reports/2009/02/Obamas-PAYGO-Law-Would-Not-Slow-Spending-or-Budget-Deficits

6. Current PAYGO Rules Are Not Enforced. Congress has operated under a PAYGO rule since 2007. In that short period of time, Congress has already bypassed PAYGO to:

Enact a stimulus bill that cost $479 billion in new entitlements and tax cuts;

Enact a veterans' education entitlement bill costing $63 billion;

Enact a student loan expansion costing $15 billion;

Twice patch the AMT; and

Enact SCHIP and farm bills that used blatant gimmicks to hide tens of billions of dollars in new entitlement benefits.[6]

Congress has bypassed PAYGO every time it has proved even slightly inconvenient to its spending agenda. There is no reason to believe another PAYGO statute would be any more successful.

Suggested Improvements

Even if PAYGO were miraculously enforced, baseline entitlement cost increases would still push the size of the federal government to nearly 50 percent of GDP by 2050. PAYGO would also promote the expiration of all 2001 and 2003 tax cuts and force millions of Americans to pay the AMT. As a result, tax revenues would rise from the historical average of 18.3 percent of GDP to a record 23.5 percent by 2050.[7] The slow-growth economies of Western Europe show that such levels of spending and taxation cause serious long-term economic damage.[8]

If a statutory PAYGO law is to be enacted, President Obama and Congress should address some of the problems by:

Making sure PAYGO treats tax and entitlement programs equally. If the renewal of expiring entitlement programs does not trigger PAYGO, neither should the renewal of expiring tax cuts.

Pledging to block any legislation cancelling a PAYGO sequestration. Otherwise, Congress will continue to expand entitlements without paying for them.

Avoiding the past practice of exempting 97 percent of entitlement spending from sequestration, which would otherwise render the law ineffective.

Enacting statutory discretionary spending caps to close the loophole exempting non-entitlement spending.

Enacting tougher entitlement controls by setting multi-year spending targets for entitlement programs covered by PAYGO. If OMB projects that spending will exceed these targets, the President would be required to submit reform proposals to reduce spending as part of the annual budget request, and Congress would have to act on those proposals.

Worse Than Doing Nothing

It is easy to suggest that even an ineffective PAYGO would be no worse than the status quo. This ignores PAYGO's bias for painful tax increases. Also, by providing a false sense of security, PAYGO would slow the momentum for vital budget process reforms that could actually rein in spending and the deficits. At the very least, the President should reduce Congress's ability to game the system by adding the improvements noted above to his PAYGO proposal.

If we need to drop the bush tax cuts to pay for things, then do it.