President Obama recently signed legislation that would restore pay-as-you-go, or PAYGO, rules to the federal government’s budget process. During his weekly address, he celebrated this move as a return to fiscal discipline, ignoring the fact that the legislation he signed also raised the debt limit by another $1.9 trillion. Here’s how the President described PAYGO:
It’s pretty simple. It says to Congress, you have to pay as you go. You can’t spend a dollar unless you cut a dollar elsewhere. This is how a responsible family or business manages a budget. And this is how a responsible government manages a budget, as well.
The problem is, it’s actually not that simple. PAYGO will most likely have a negligible impact on government spending and encourage Congress to raise taxes rather than make spending cuts. In fact the Congressional Budget Office has said that the PAYGO “process has other features that could lead to greater spending or lower revenues in the coming decade than would occur under the existing House and Senate rules.”
PAYGO rules don’t apply to all government spending. 40 percent of total spending is appropriations bills, which are exempt from PAYGO. In the past this loophole has been used to increase mandatory spending programs. Congress can also get around PAYGO requirements by declaring spending necessary because of an “emergency.” For instance the Republican Caucus’ Budget Committee contends that “the $787 billion ‘stimulus’ bill (now estimated by CBO to be $862 billion) was designated as an ‘emergency,’ so pay-go did not apply to it.”
If the President wants to compare the PAYGO budget procedure to how a responsible family manages a budget, he should be clear that this family would be allowed to make ad-hoc exceptions to their rules and could still increase their yearly debt by more than eight times – just like PAYGO allowed for from 2007-2009.
Though the term might function as word candy for politicians trying to look tougher on spending, PAYGO rules will do little to encourage real fiscal responsibility or reduce deficits. Restoring fiscal discipline will take a commitment from policymakers to not just create new budget rules but to directly cut government spending.
Tags: appropriations, budget rules, CBO, Obama, pay as you go, pay-go, PAYGO, spending, stimulus
