The president is fond of mentioning "PAYGO" when he is questioned about his administration’s spending proposals. For example, at his G-20 press conference, he responded to a reporter asking whether the stiff deficit reduction goals of our allies “repudiated” his economic views:
In fact, you can make the argument that some of the steps that I’ve already taken--freezing domestic discretionary spending for the next three years in my budget, passing PAYGO, setting up a fiscal commission to tackle issues like entitlements long term--that many of those decisions are comparable to some of the decisions that have been made by those who are promoting fiscal consolidation.
If the steps that Obama has taken so far are “comparable” to the austerity plans we’re seeing in other countries, why is PAYGO being completely disregarded by the Democrats in Congress and the administration?
Two cases in point:
1. Yesterday, the House voted on a $33 billion unemployment aid measure, which needed a two-thirds majority to pass under an “expedited procedure used by Democratic leaders to limit debate,” according to Bloomberg. The bill failed because House Republican leaders pointed out that the bill was not paid for under PAYGO, causing 139 Republicans and 16 Democrats to vote no. The bill will be brought up again today by the Democratic leadership under regular rules, which require only a simple majority for passage. The bill is expected to pass this time despite the fact that it is not paid for under PAYGO.
2. The Senate conference committee working on the financial regulatory reform bill voted along party lines, 27-16, to strike the $19 billion tax on banks which was added early Friday morning to pay for the cost of the bill, according to Politico. (Apparently Scott Brown announced he wouldn’t vote for it with the bank tax included.) So the Democrats decided that instead of taxing the banks, the legislation will be paid for with $11 billion drawn from TARP money that’s been paid back. The problem, Republicans pointed out, is that TARP funds are not supposed to be used for new spending. David Indivigilio, writing in the Atlantic, gets to the bottom line: “Instead, taxpayers will pay for the regulation, since any TARP money unspent was supposed to go towards paying down the deficit. Those billions of dollars that would have been wiped out of the deficit will now have to come from the American people.”
Economist Stephen Moore defined PAYGO in the Wall Street Journal as “rules [that] require new entitlement spending and new tax cuts must be paid for dollar-for-dollar with entitlement spending cuts or tax increases.” The catch is that if Democrats declare a bill “emergency spending” it doesn’t have to be offset by other spending cuts. "I really can't think of the last time the Democrats paid for anything they want to spend money on," Paul Ryan, the ranking Republican on the House Budget Committee, said to the Journal.
Moore says the Democrats sing the praises of PAYGO because it’s really designed to stop tax cuts rather than check spending. Clearly that’s true with the “emergency” unemployment bill, which is pure unchecked spending. With the banking bill, it sounds like Republicans balked at higher taxes to pay for it, so Democrats turned to spending out of funds reserved for deficit reduction--not by cutting spending elsewhere. That’s like paying for a new purchase out of cash you put aside to pay the credit card bill and hoping no one will notice. The difference is the ones spending the money aren’t the ones who have to pay the bill--which, of course, would be us.