President Barack Obama talks a good game on pay-as-you-go budget rules. He says he wants to enforce the PAYGO rules, which require that new spending commitments or tax cuts be offset by other program cuts or new tax revenue. He's also said he wants Congress to go beyond its current PAYGO rules by passing a law that would presumably be tougher and more binding.
But as we've seen with PAYGO discussions of the last 20 years, lawmakers pay lip service but little else. Year after year, they have found creative new ways to sidestep it.
In the Obama presidency, there have only been two significant bills that would be subject to PAYGO — the gargantuan economic stimulus bill, which spent $787 billion in federal money to revive the economy, and the children's health insurance bill that passed in early February.
Let's take them one at a time.
Congress exempted the economic stimulus bill from PAYGO because of the very nature of the bill. Its goal was to flood the economy with new money. Advocates said that if the bill required an equal-sized tax increase or cuts in other programs, that would erase the effectiveness of the bill. The goal of a stimulus bill is a net increase in spending to boost the economy. But there would be no net increase if the bill had a PAYGO provision that forced people to pay higher taxes or made Congress cut spending on other programs.
For the children's health insurance bill, Congress followed the PAYGO rule, but with the help of a budgetary trick. The bill fully funded the program for the first five years but then slowed the funding to a trickle for the next five years. But on the revenue side, it relied on a full 10 years of receipts from a 62-cent-per-pack increase in the tobacco tax. Republicans complained that the only way the bill could comply with the pay-as-you-go rule was to rely on a bookeeping gimmick.
Now, let's look at what Obama has done on the issue. He has spoken several times about his support for PAYGO and has urged Congress to pass a law that likely would be stronger than the existing congressional rules. He has said that PAYGO "is the principle that helped transform large deficits into surpluses in the 1990s" (a claim we found to be Half True) and he wants the rule to be strengthened into a law.
"We need to adhere to the basic principle that new tax or entitlement policies should be paid for," he said in his radio address on April 25.
But as the history of PAYGO has shown, talk is a lot cheaper than complying with the rule. Congress was required to follow a PAYGO law during the 1990s but found ways to evade it, usually by ignoring the annual requirement to come up with offsetting cuts or tax increases.
"If Congress wants to pass something bad enough, they will never let a budget rule get in the way," said Brian Riedl, a budget analyst for the conservative Heritage Foundation.
Admittedly, Obama doesn't have direct control over whether Congress complies with its current PAYGO rules. But three months into his presidency, there's little evidence that he is using his executive authority (such as the veto) or the power of the bully pulpit to push for an honest-to-goodness PAYGO commitment. Even if you accept that the economic stimulus bill should not be subject to the rule, we see no evidence that he spoke up about the gimmick in the children's health insurance bill.
We'll be keeping an eye on this one as Obama's health care plan moves through Congress, but so far we've seen little more than lip service. So we rate this promise Stalled.
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← Back to Enforce pay-as-you-go (PAYGO) budget rules
Lots of talk, but little action
Our Sources
Republican members of the House Energy and Commerce Committee,
Nine Great Reasons to Oppose H.R. 2
, Feb. 2, 2009
Congressional Budget Office,
Cost Estimate for H.R. 2
, Jan. 13, 2009
Project Vote Smart,
President Obama's remarks on signing SCHIP
, Feb. 4, 2009
Interviews: Brian Riedl, Heritage Foundation, May 18; James Horney, budget analyst at Center on Budget and Policy Priorities, May 15; Steve Ellis, vice president Taxpayers for Common Sense; Josh Gordon, policy director, Concoard Coalition.