Pay-as-you-go — the concept that any new government spending must be paid for by revenue increases or cuts elsewhere — sounds reasonable.
Like so much else, however, details make the difference and the pay-go rules announced this month by President Obama appear weak.
At the same time, however, it is encouraging to have a White House that supports pay-go after nearly a decade of budget-busting tax cuts and wars funded through emergency appropriations so they don’t end up in the federal budget.
Rep. Mike Michaud applauded the White House’s support for pay-go, but he and other members of the fiscally conservative Blue Dog Coalition question whether the proposal goes far enough. It exempts the 2001 and 2003 tax cuts and estate and alternative minimum tax fixes, along with Medicare payments to physicians.
“The president deserves to be commended for focusing on the need to return our country to fiscal discipline. Pay-go alone can’t get rid of our total debt, but it will help prevent its growth. The bottom line is that we must pay for what we pass in Congress and not exempt trillions in spending from that goal,” Rep. Michaud said in a recent statement.
Robert Greenstein, the executive director of the left-leaning Center for Budget and Policy Priorities, offered a different perspective in testimony for a House Budget Committee hearing. Although he acknowledged that pay-go rules should cover all spending, it is not realistic to wrap the cost of the tax cuts and other spending decisions made long ago into the revived pay-go requirements.
“It makes no sense to put in place a pay-as-you-go rule that says these extensions must be paid for when everyone knows they will not be,” Mr. Greenstein wrote. “Rather than making a phony promise that will lead inevitably to a series of waivers of the pay-as-you-go statute — waivers that will undermine support for the rule itself and open the door to waivers for other costly policies — it is appropriate to acknowledge up front that these specified extensions of current policy will not be subject to the rule and to insist that the rule be strictly applied to any other legislation that is not paid for.”
So, this is the difficulty for lawmakers: Craft pay-go rules that are meaningful but realistic. That means and end to the overuse of “emergency” spending to hide large expenses — such as the wars in Iraq and Afghanistan — from deficit calculations. It also means ensuring future payments are ac-counted for is more important than trying to squeeze past tax breaks into the pay-go stricture.
A return to pay-go rules is welcome — as long as the rules aren’t so full of loopholes to make it meaningless.