House Speaker Nancy Pelosi (D-CA)

Just last week Congress revived PAYGO legislation which is supposed to force legislators to offset any new spending with spending cuts elsewhere in the budget. While this won’t come as a shock to most Foundry readers, The Hill reports that “the ink is barely dry on the pay-as-you-go law, and Democrats are seeking to bypass it to enact parts of their job-creation agenda.”

The problem with PAYGO is not its intent–serious efforts to reduce the deficit should be met with genuine interest by all conservatives–the problem is its inevitable implementation. PAYGO has unfortunately always been a gimmick. Heritage analyst Brian Reidl explained the main problems this summer when the President first announced his intention to revive PAYGO:

1) PAYGO has never been enforced

  • During the 1991-2002 round of statutory PAYGO, Congress and the President still added more than $700 billion to the budget deficit and simply cancelled every single sequestration that would have enforced PAYGO. Even if Congress had wanted to enforce PAYGO during that period, they had already exempted 97% of all entitlement spending from sequestration cuts. It was basically designed to fail.
  • Since the 2007 creation of the PAYGO rule, Congress has waived it numerous times in order to add $600 billion to the deficit. In fact, the entire “stimulus” bill violated PAYGO; Congress simply ignored the rule.

2) PAYGO’s design is flawed

  • PAYGO exempts all discretionary spending, and would also allow all current entitlement programs like Social Security, Medicare, and Medicaid to continue growing on autopilot. It affects only new entitlements or tax cuts that may be created in the future.
  • Even if PAYGO were fully enforced, entitlement spending would still grow 6 percent annually, and discretionary spending could grow without limit.

In addition to the exemptions for discretionary and most entitlement spending that Brian mentions above, there are also exemptions for anything deemed to be “emergency” spending. Indeed, last year’s “stimulus” bill was so labeled and was exempted from being offset by spending cuts. In short, those who claim, as President Obama has, that PAYGO means that “Congress can only spend a dollar if it saves a dollar elsewhere” are kidding themselves.

This is perhaps the worst feature of PAYGO: it gives cover to politicians who can claim to be addressing our government’s addiction to spending, while exempting seemingly every new spending bill from these requirements. As Maya MacGuineas, President of the Committee for a Responsible Federal Budget, has put it, it’s like “quitting drinking, but making an exception for beer and hard liquor.” After so much reckless spending, only real efforts at fiscal discipline—which has to include tackling our growing deficits and entitlement programs—will signal to the American public that our representatives are serious about this issue.