It’s rare to find good news when it comes to the federal government’s fiscal health. The national debt is now a staggering $22.8 trillion, the current fiscal year deficit is likely to exceed $1 trillion, and annual federal spending increases far exceed economic growth even during good years.
All this makes the latest executive order signed by President Donald Trump so necessary. If federal agencies and future administrations stick to the rule, it could prevent billions of dollars in debt-financed spending.
The rule, which builds off a less-binding memo issued in 2005, requires the federal government to cover the cost of agency decisions that would increase spending. The process is called administrative “pay-as-you-go,” or PAYGO. The Trump administration has seen positive results from a similar 2017 initiative on regulations.
Even for Americans with a strong understanding of civics, the concept of administrative PAYGO can be confusing. After all, Congress is supposed to make spending decisions through legislation, and the executive branch merely puts those laws into action. How then would federal agencies have the ability to raise or cut federal spending?
This dysfunction is a result of two types of congressional irresponsibility.
First, Congress has placed larger and larger amounts of federal spending into the “mandatory” category. Such programs do not require annual spending authorizations, and are able to avoid many budgetary restraints even on the rare occasions when Congress bothers to pass a budget.
Second, Congress has delegated more and more decision-making power to agencies. Laws that create mandatory programs often contain language allowing federal agencies to spend “such sums as may be necessary” to carry out a directive, which almost has the effect of giving bureaucrats a blank check.
If a law provides an agency with significant leeway in terms of designing and changing programs, the agency can re-design the program later to make it more expensive with few or no consequences. The new PAYGO rule would create consequences where none currently exist.
Ironically enough, a significant example of an agency initiative increasing spending took place under the Trump administration.
The Department of Agriculture through its so-called trade aid for farmers has spent and promised to spend tens of billions of dollars without explicit authorization from Congress. This is possible due to broad powers granted to the USDA through the New Deal-era Commodity Credit Corporation, which includes a $30 billion annual spending limit.
Even setting aside the many flaws with the USDA program, the fact that Congress has created a law that doesn’t require legislators to have meaningful input in the design and implementation of a federal activity that spends billions of dollars a year is a constitutional travesty.
It takes a year’s hard work from tens of thousands of Americans to produce $1 billion in the economy. Any program spending such enormous amounts should receive serious scrutiny.
The “trade aid” itself only came about because of yet another area of congressional dereliction: trade and tariffs.
Laws have repeatedly delegated trade-related authority to the executive branch. In the case of the ongoing trade dispute with China, this has resulted in U.S. farmers losing billions of dollars in sales without direct approval from Congress.
Had the new administrative PAYGO rule been in place two years ago, it is possible that the USDA’s “trade aid” would have been much less expensive for taxpayers. Although Section 7 of the PAYGO rule authorizes waivers based on standards such as “effective program delivery” and “the public interest,” the administration’s intent is clear.
If agencies follow the rule as closely as possible, and if future administrations keep the rule in place, it could stop wasteful initiatives from getting off the ground.
Yet the fact that the rule is even necessary is genuinely shameful. Congress, which has made a mockery of its own version of PAYGO, should reclaim decision-making powers ceded to executive branch agencies and use those powers responsibly.
The new executive order is a step in the right direction. However, it is no substitute for vitally needed laws to create comprehensive budgeting covering all categories of spending, robust fiscal rules, and a more manageable federal government.