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House Approves "Pay-As-You-Go" Budgeting Rules

July 22, 2009 - by Isabelle Cutting

The Statutory Pay-As-You-Go Act of 2009 passed after consideration in the House this afternoon by a vote of 265-166. The bill seeks to establish exactly what it defines in its title as a form of budget enforcement – that Congress can only spend money if it saves at least the same amount elsewhere. Broadly, the PAYGO requirements are intended to ensure that laws affecting mandatory spending or revenues are budget neutral through the year 2013.

H.R.2920 was introduced by House Majority Speaker Steny Hoyer [D, MD-5] last Friday and carries support from 166 democrats and the Independent Mariana Islands Rep. Three days earlier, Obama transmitted legislation to Congress establishing a statutory PAYGO requirement. The differences between the envisioned pay-go bills of Obama and Hoyer can be seen here.

This legislation follows from the Budget Enforcement Act of 1990 and its PAYGO feature, which expired after 2002. Under such legislation, the nation’s fiscal outlook improved, yet as the Congressional Budgetary Office (CBO) stated there exists no inherent causal relationship between a lessened budget deficit and the 1990 legislation. Nevertheless, the CBO has said that the PAYGO framework “may have contributed to more favorable budgetary outcomes by discouraging the adoption of policies that would have worsened the fiscal outlook.”

With hopes for renewed fiscal improvements, inferences stemming from Pelosi’s blog state that the Tri-Committee House health care bill would yield a $6 billion surplus. This would seem to address criticisms from Blue Dog Democrats and Republicans that the current House health bill isn’t deficit-neutral. The calculated $6 billion surplus, however, derives not specifically from H.R.3200, but H.R.2920. In brief, the $245 billion carved out from the pay-as-you-go legislation can be compared against the $239 billion, which H.R.3200 adds to the deficit, to produce an overall $6 billion surplus.

On the House floor, Hoyer stated that the legislation is

“one of the most important actions we can take toward fiscal [discipline in] this Congress.”

Similarly, the White House acknowledged that although the pay-go legislation would not solve all budgetary problems, it is committed to cutting the deficit in half by the end of Obama’s first term. Thus,

“Enacting statutory pay/go would complement this effort and strengthen the budget process.”

On a more cautious note, CBO wrote:

Combined with the Congress’s existing pay-as-you-go rules, a statutory sequestration mechanism such as the one proposed under H.R.2920 could enhance overall budget enforcement. However, if the system envisioned in H.R.2920 was used in place of the current Congressional rules or a more stringent statutory PAYGO system, the legislation’s enactment could lead to larger future deficits. In addition, H.R.2920 would shift a significant amount of control over the budget process from the Congress to the executive branch.

As indicated by the bill’s list of co-sponsors, most republicans do no view the bill favorably and, pointing to the above mentioned CBO analysis, believe the pay-go bill will actually raise taxes rather than not reduce the deficit.

Along a different vein of argument and in anticipation of the Senate’s handling of the PAYGO legislation, Senate Budget Chairman Kent Conrad [D, ND] stated that he does not support putting the bill into law because it would cede too much control to the White House.

Here are some more links for discussion surrounding the Pay-go bill:

  • Rep. Paul Ryan’s request for a CBO Analysis and CBO’s response (CBO)
  • CBO Scores Confirm Deficit Neutrality of Health Insurance Reform Bill (The Gavel)
  • Budget Neutrality Clarification (Medicare Update)
  • The Progressive Case for PAYGO (Huffington)
  • House Dems not winning over critics with pay-as-you-go bill (The Hill)
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