Returning to a federal budget system that requires new expenditures to be paid for with cuts or tax increases elsewhere is overdue. Unfortunately, a “pay-as-you-go” bill passed by the U.S. House is too weak to make much difference.
The bill passed late last month excludes extensions of Bush era tax cuts, funds to minimize the effects of the alternative minimum tax and increases in Medicare reimbursements for doctors. These exempted areas are estimated to add up to $3 trillion to the deficit in the next decade.
The pay-as-you-go, or pay-go, bill would also apply only to taxes and mandatory spending, such as entitlement programs. It would not cover discretionary spending, which is about 40 percent of the federal budget. Worse, they come after the House has approved 12 appropriations bills that substantially increase domestic spending.
Under strict pay-go rules, if new spending or tax cuts are not offset, automatic cuts in mandatory programs such as Medicaid and Social Security would kick in. The aim is to force lawmakers to more carefully consider new spending rather than simply adding to the deficit.
Stricter pay-go rules were in effect from 1990 to 2002, a time when the federal government went from yearly deficits to a surplus. They were allowed to expire under Republican control of Congress, when huge tax cuts were enacted and wars were paid for outside the budget rules.
A return to pay-go is welcome, but to be meaningful, the rules must be stronger.
“I would have preferred that the House bill take a stricter approach so that we could begin to more aggressively cut down our mountain of debt,” Rep. Mike Michaud said after the bill’s passage. “It is my hope that we will have a chance to strengthen this bill as it makes its way through the legisla-tive process.”
That chance will come when the Senate takes up pay-go rules. They should reconsider the stronger provision championed by the conservative Blue Dog Coalition, of which Rep. Michaud is a member. House Republicans also offered a tougher version, which would have imposed caps on appro-priations.
Both Sens. Olympia Snowe and Susan Collins have long been supporters of pay-go rules. They should help ensure the rules that are ultimately enacted will actually do something to rein in spending.