Looking For Some Cover On Out Of Control Spending, Obama Resurrects Paygo
It seems as though every time liberals want to appear to be fiscally responsible they start talking about pay-as-you-go budgeting, or “paygo.” It’s a system of budgeting that requires new spending to be paid for with increased taxes, and tax cuts to be paid for with spending cuts.
Obama, who is under a storm of criticism for his budget-busting, deficit-exploding spending to date, is the latest liberal to tout the idea.
The president’s plan would require Congress to pay for new entitlement spending, such as health care, by raising taxes or coming up with budget cuts — a “pay-as-you-go” system that would have the force of law. Under the proposal, if new spending or tax reductions are not offset, there would be automatic cuts in so-called mandatory programs — although Social Security payments and some other programs would be exempt.
Not noted by the president: Tuesday’s plan is a watered-down version of the so-called “PAYGO” rules proposed just last month in his own budget plan.
That version would have required, on average, all affected legislation to be paid for in the very first year. The new plan only requires such legislation to be financed over the coming decade. That mirrors congressional rules and reflects the likelihood that health care reform will add to the deficit in the early years.
Marc Ambinder at The Atlantic is calling this the “return of the deficit hawks.” Of course, as a constituent of one of the most phony-baloney self-proclaimed “deficit hawks” in Congress (Obama’s buddy Senator Kent Conrad), I know that when a Democrat says “deficit hawk” they’re full of it.
Certainly any attempt to claim that Obama is concerned at all with deficits, given what he’s done to the national budget since coming into office, should be laughed at.
The problem with paygo is twofold.
First, Congress only has to “pay” for increased spending by promising to raise taxes for it at some point in the next decade. There’s nothing binding about that promise. Leadership could change in the White House and/or Congress, and the tax increases to pay for the spending might never actually happen.
Second, paygo doesn’t take into account the stimulus impact of tax cuts. Not always, but sometimes tax cuts can pay for themselves by stimulating enough new economic activity to make overall tax receipts rise. We saw that with the Bush tax cuts in 2003. After they were put in place we saw several years of economic expansion, coupled with increasing levels of federal tax receipts that were actually setting records. Paygo doesn’t take that stimulus impact into account, mostly because liberals are unwilling to admit that decreased tax burden on the economy is a stimulus (as opposed to mass government spending programs and the tax hikes that fund them).
Once again, this move from Obama is more about appearances. He, like far too many Presidents of both parties before him, wants to appear to be getting a hand on out of control spending without actually having to do the tough work that would balance the budget.