Assigned Reading: Obama Pitches Pay-As-You-Go Plan for Congress
(FROM: Associated Press)
What position is Barack Obama in to preach fiscal responsibility and restraint? My goodness, the hypocrisy is so gosh-darned thick here that even Al Gore, riding in his carbon-spewing private jet on the way to a “climate change” conference, is likely shaking his head.
Furthermore, what the AP piece doesn’t seem to mention is that Congress already has a “PAYGO” rule in place, and has had that rule in place since 2007. The problem, contends the Heritage Foundation, is that it is “merely a congressional rule” and therefore can be easily waived by elected officials. In fact, such a waiver happened recently — for Barack Obama’s so-called “stimulus” bill.
From that same February 26, 2009 Heritage piece, a list of six problems with PAYGO:
- PAYGO Would Not Decrease the Growth of Federal Spending. PAYGO is not designed to reduce federal spending. It is not even designed to slow the growth rate of spending. It only limits the creation of new entitlement benefits above the spending growth baseline. In fact, entitlement spending grew faster after statutory PAYGO took effect in 1991.
- PAYGO Exempts Discretionary Spending. Discretionary spending programs–which comprise nearly 40 percent of the federal budget–are totally exempt from PAYGO rules. In other words, Congress could provide unlimited budget increases to most defense, education, health research, justice, international, environmental, veterans’ health, homeland security, and housing programs without triggering PAYGO. This loophole is a major flaw that substantially weakens PAYGO.
- PAYGO Exempts Current Entitlement Benefits. Under PAYGO, current entitlement programs can continue to grow on autopilot. Only newly created entitlement benefits must be offset. In short, PAYGO would not prevent (a) Social Security from growing 6 percent annually; (b) Medicare and Medicaid from growing 7 percent annually; and (c) Nominal entitlement spending from nearly doubling over the next decade. PAYGO could theoretically slow down the creation of any new entitlements. Yet the nation’s main budgetary challenges stem from the $44 trillion unfunded obligation from Social Security and Medicare, as well as the growing costs of current entitlements like Medicaid. PAYGO would do nothing to reduce the growth rate of these programs.
- PAYGO Employs a Double Standard That Raises Taxes. Every few years, Congress must review and renew most entitlement programs and many tax cuts. PAYGO sensibly says that renewing an existing entitlement program is not “new” spending and therefore does not need to be offset. However, PAYGO applies a different standard to tax cuts. It classifies tax cut extensions as “new” tax cuts that violate PAYGO and must be offset. This makes no sense. PAYGO was intended to block the creation of new policies that increase the deficit. Simply keeping current tax policies in place should not be treated as “new” tax cuts. Additionally, the blatant double standard of allowing entitlement spending policies but not tax policies to be extended constitutes a major bias towards higher taxes and spending. For instance, PAYGO allows the extension of expiring SCHIP and farm subsidy laws, but it does not allow the extension of the 2001 and 2003 tax cuts or the Alternative Minimum Tax (AMT) to be patched without offsets. Even President Obama has criticized this double standard, and Congress should eliminate this baseline disparity from any PAYGO statute.
- Previous PAYGO Statutes Were Never Enforced–Even Once. Congress already had a PAYGO statute from 1991 to 2002. But this law was never enforced. Over the statute’s 12 years, Congress enacted more than $700 billion in new entitlement spending and tax cuts–and then enacted legislation cancelling every single sequestration. Even if Congress had allowed sequestration, they had already enacted legislation exempting 97 percent of all entitlement spending–all but $31 billion–from being part of any sequestration. The law was practically designed to fail. Entitlement spending actually grew faster during the 12 years of PAYGO (1991-2002) than in the 12 previous years (1980-1991). The budget did temporarily achieve balance during that period. Yet PAYGO had very little to do with it. The budget was balanced by the combination of the dot com bubble revenue boom, defense savings after the Cold War ended, and declining net interest costs.
- Current PAYGO Rules Are Not Enforced. Congress has operated under a PAYGO rule since 2007. In that short period of time, Congress has already bypassed PAYGO to: (a) Enact a stimulus bill that cost $479 billion in new entitlements and tax cuts; (b) Enact a veterans’ education entitlement bill costing $63 billion; (c) Enact a student loan expansion costing $15 billion; (d) Twice patch the AMT; and (e) Enact SCHIP and farm bills that used blatant gimmicks to hide tens of billions of dollars in new entitlement benefits.
This is not a fix. This isn’t even substantial enough to qualify as a gimmick. Our spendthrift president calling a press conference and advocating PAYGO is merely an act of political gamesmanship born from West Wing worry about the perception of this administration’s lack of fiscal restraint and meant to appeal to the lowest common denominator in terms of those who pay attention to the goings-on in Washington, D.C. It’s meant for a soundbite to be heard by clueless people from coast to coast as they wait for the five-day forecast from their local news station. It’s meant for a headline in Obama-friendly newspapers to be read by people, through the plexi-glass of the vending machine, as they wait on a train or bus or traffic light.
Then again, how is this any different than anything done by this administration so far?