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You are here: Home / Politics / Domestic Politics / The Return of Pay-Go

The Return of Pay-Go

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That is what Obama is talking about today:

Obama used his weekly radio address to report that he signed into law on Friday night the legislation commonly known on Capitol Hill as “Pay-Go,” which has been used sporadically over the past 20 years by congressional budget-writers. Obama also repeated his call for $20 billion in budget cuts, a freeze in certain government spending, and the creation of a fiscal commission.

But it was the pay-go legislation that highlighted the address. Obama credited the concept with the balanced budgets of the 1990s and its abandonment for the deficits of the past decade. He signed the law as part of a larger measure that raised the government’s debt ceiling from $12.4 trillion to $14.3 trillion, as Congress authorized in a divisive vote last month. Obama’s address did not mention the debt ceiling increase.

“In a perfect world, Congress would not have needed a law to act responsibly, to remember that every dollar spent would come from taxpayers today – or our children tomorrow,” Obama said of the pay-go law.

“But this isn’t a perfect world. This is Washington. And while in theory there is bipartisan agreement on moving on balanced budgets, in practice, this responsibility for the future is often overwhelmed by the politics of the moment. It falls prey to the pressure of special interests, to the pull of local concerns, and to a reality familiar to every single American – the fact that it is a lot easier to spend a dollar than save one. That is why this rule is necessary.”

The pay-go concept has a rocky past on Capitol Hill. First used as part of federal budget legislation in 1990, it fell into disuse starting in 1998 and expired completely in 2002. It was re-established as a House rule — not a law — in early 2007, but was again waived in 2008.

Hrmm. What happened between 2002-2007? Who was President? Who was running the show in those years? Ah, yeah. The fiscal conservatives.

Reader Interactions

93Comments

  1. 1.

    jwb

    John, you know very well that the first rule for any fiscal conservative is that deficits matter only when Democrats are in charge.

  3. 3.

    Libby

    And OT, 2 inches of dry powdery snow here in the little city in midwestern NC. Dropping off the trees making trails of fairy dust. Actually very pretty in the sun.

  4. 4.

    John S.

    Yet another piece of breathtaking hypocrisy by the GOP. Note to Democrats: What Obama says in his weekly address is probably what you want to follow through with in your talking points next week. You know, help back up the President and further amplify what’s coming from the bully pulpit and all.

    Of course, when they fail to do so, it will be Obama’s fault for not giving them strong enough leadership. Or something.

  5. 5.

    KCinDC

    Defense spending is exempted, so killing people on the other side of the planet and enriching Halliburton and Blackwater will continue to be something we never need to consider how to pay for. Military spending is always magically free.

  6. 6.

    El Cid

    George W. Bush warn’t no damn conservative! He was a librul! And we figgered this out about late 2005!

  7. 7.

    capt

    “Ah, yeah. The fiscal conservatives.”

    Thanks – I had to clean up coffee from my keyboard after that one!

    lol

  11. 11.

    demo woman

    They ran up the deficit so high that they now think that the only thing left to do is get rid of Social Security and Medicare. This was Norquist’s dream.
    What is true irony is to give the elderly prescription drugs only to snatch it away later.

  13. 13.

    Joey Maloney

    Major OT here, but just a request to spare some good thoughts for the folks in Huntsville, Alabama. They’ve had a pretty trying few days. Last week a middle-school boy shot another one in the head and killed him. (This happened at the school a friend’s daughter attends. She heard the gunshot from down the hall.) And yesterday a professor at UAH, described as one of the university’s star researchers, opened fire on her tenure committee, killing 3 including the department chair and wounding 3 others.

  14. 14.

    Linda Featheringill

    I saw a snow in NC once – beautiful. Like a pretty lady decked out with lace.

    And yes, we have snow in Cleveland. This particular snow has cost me pulled back muscle, strained biceps muscle, and a really pissed off patellar tendon. Sigh.

    Tell me again how we are not getting older, we are getting better. I seem to have forgotten that.

  16. 16.

    taylormattd

    Paygo is terrible, unfortunately. It’s a method conservatives use to prevent Democrats for enacting social programs.

  21. 21.

    Wilson Heath

    @demo woman:
    Yep. “Starve the beast.” The strategy fails because the idiots don’t get that people like social services and would rather go back to taxing the rich fairly than losing them. See, e.g., Oregon.

    I’m taking this as a line in the sand about extending the Bush tax cuts. Making them permanent is a change from the baseline of current law, meaning they would have to be paid for by raising other revenue or cutting other spending, and good luck with either. Contrary to Laffer, tax cuts have never paid for themselves in the U.S., ever. So anyone who cries for tax cuts is begging us to add to the deficit. Even idiots catch on when they start having to balance the checkbook.

  22. 22.

    Kennedy

    You forget that tax cuts and endless wars do not count as spending money. They are the price of freedom.

    Because shut up, that’s why.

  25. 25.

    Rick Taylor

    Rules like Pay Go are unnecessary when fiscal conservatives are in charge. There are only needed as a check when free spending Democrats are in charge.

  26. 26.

    bemused

    Republicans’ asserting that they are fiscally responsible/conservative & faux news pie charts are both equally & deliberately misleading. I’m wondering when middle-class R’s are going to catch on that the R party is absolutely lousy handling taxpayer money except when it’s going into their own pockets.

  27. 27.

    Dominique (MBA EyeDoc)

    @Joey Maloney:

    Thanks for the mention. I am originally from Huntsville and I was talking to my mom yesterday while everything was going down. It’s been a tough week there. I think she is going to remain in her house because it appears that nowhere is safe right now…

  28. 28.

    SIA

    @jeffreyw: Wow a cluster of cardinals. It’s strange because that’s the 2nd large group of cardinals I’ve seen this week. We were in AL for a few days and there were 10-12 of them out in the yard, which I’ve never seen before. And then yourphoto showing same thing. Beautiful photo. I notice all the cardinals are facing the hawk!

  33. 33.

    Senyordave

    Maybe I’m in the minority, but I think that fiscal responsibility could be a winning issue for the Democrats. I would love to see an Obama speech pointing out that we have a half trillion dollar structural deficit in this country, and we have to fix that now. He seems to be starting to do that, but start specifically calling out the Republicans. And make them come up with ideas!

    I know its too much to expect people to understand that we sometimes need to have deficits, so long as we balance that out with an occasional surplus. But if the Dems actually talk about the deficit in adult way and make it a major issue, the GOP will look like fools if they don’t come to the table.

  36. 36.

    MagicPanda

    @Ana Gama: That’s because (a) Obama didn’t beat his chest and talk and talk and talk about how he cut taxes, which is a mistake, and (b) the tax cuts were designed to drip into your paychecks over time, as opposed to being a one-time check, which was probably the correct policy, but possibly the wrong politics.

  37. 37.

    robertdsc

    But if the Dems actually tak about the deficit in adult way, the GOP will look like fools if they don’t come to the table.

    They’ve been fools for a long time now. Yet they’re not paying any price for it due to Dem incompetence.

  42. 42.

    MagicPanda

    @Senyordave: I hope so. After the 2008 election, it was pretty clear that the Republicans had run just about every aspect of government into the ground, and the Democrats were acting like responsible adults.

    Fast forward a year and a bit, and the GOP is still acting like children, but somehow they have flung around so much mud that both parties look equally bad.

    I’d like to think that acting like adults will be rewarded by the electorate, but my fear is that the mud-flinging will obscure all of that.

  45. 45.

    SIA

    @MagicPanda: I don’t think acting like adults will do the dems much good unless they also pass some high visibility legislation (coughcoughHCRcough) and stop being cowered by the GOP. We can hope. Anyway, acting like an adult is seen as elitist by the deliverance wing of the population.

  46. 46.

    Tom Hilton

    Hrmm. What happened between 2002-2007? Who was President? Who was running the show in those years? Ah, yeah. The fiscal conservatives.

    Who was running the show? The party that just voted unanimously against restoring PAYGo.

  51. 51.

    SiubhanDuinne

    Crumbs. I hate that the BB loads so slowly that by the time my clever comment shows up, a dozen other posters got there first with the same joke or better.

    /going off to pout

  52. 52.

    SIA

    @SiubhanDuinne: Saw your comment last night about your commute home yesterday – 2 1/2 hrs was it? I left about 3:00 and came back around 5:30 and the roads were already slushing up. People were driving very slowly :)

  54. 54.

    Libby

    @SIA: The snow does brighten things up. Sun is already winning the day though. The roads were a little icy when I wrote that. It’s all melted now, even on my little side road that doesn’t get much traffic.

  55. 55.

    MagicPanda

    @taylormattd: I don’t know 100% of the history of paygo, but it looks to me like Republicans don’t like paygo in general.

    While they talk a fiscal conservative game, the paygo rules would prevent them from enacting unfunded tax cuts.

    BTW, speaking of “tax cuts”… Republicans use the phrase “tax relief”. I hate that phrase, and I’d love a two word phrase that more clearly represents what’s happening. Something like “taking your money and giving it to Paris Hilton and Wall Street bankers”.

    “tax kickback”? “government help for millionaires”?

  56. 56.

    AJ

    “Throughout the 1990s, pay-as-you-go rules effectively prevented unpaid-for entitlement expansions and tax cuts.”

    N.B.: Key words in that sentence: tax cuts. Because, then came the administration of Commander Codpiece O’Blivious, our “MBA Prezinet”.

    In 2001 all that surplus cash backed up Bush administration’s collective colons and they pounded Congress to waive the rule in order to enact – large tax cuts! It was in the way of a tax cut, so it had to go. Gee. Whodathought?

    Because of that, Paygo died for good at the end of fiscal 2002.

  59. 59.

    Ana Gama

    OT

    Just when ya thought they’d already struck bottom….the WaPo hires Marc Thiessen to write a weekly column.

  60. 60.

    mclaren

    Hrmm. What happened between 2002-2007? Who was President? Who was running the show in those years?

    Clinton, obviously. Duh! Jeez, libtards, learn your history! We have a gigantic recession that started when Bill Clinton began tossing money at welfare queens. Deficits ballooned and the country’s economy went into the toilet, as it always does under Democrat presidents like FDR and JFK. Then the Greatest President of the Modern Era, “a man of extraordinary vision and brilliance approaching to genius,” [John Hinderaker] became president and deficits shrank through the Magic of the Market™ while the Laffer Curve® gave us fabulous prosperity as far as the eye could see, in the form of sustainable industries like condo flipping and McMansions©.

    But then Barack HUSSEIN Obama wormed his way into the presidency and immediately after he usurped the Oval Office the American economy went down the toilet (it was a reaction, obviously) and those TARP bailouts HUSSEIN Obama engineered didn’t help.

    Get a clue, libtards. The economy only grows under Republicans like Herbert Hoover. Palin/Cheney 2012! Palin/Cheney 2012! Palin/Cheney 2012!

  64. 64.

    cat48

    Saw snow near Charleston SC for about 12 hrs and then it was gone. Very pretty coming down last night……sorta miss snow since I’m from IL originally. Hope to return in a few yrs.

  65. 65.

    TR

    Supply Side Economics = The All Ben and Jerry’s Diet

    It sounds terrific, it requires no sacrifice, but it just doesn’t seem to work.

  66. 66.

    DougL (frmrly: Conservatively Liberal)

    @mclaren:

    If I were a wingnut I just might worship your brilliance for that literary masterpiece. That I am not just makes me laugh at how well you wrapped it all up in one breathy statement.

    Congratulations?

  67. 67.

    :Libertini

    OT, but I had to share. Four of my friends/old classmates joined and invited me to join a group on FACEBOOK called Making Drug Tests Required to Get Welfare (or as I call it, Let’s Make Becoming a Dealer Even More Appealing to Addicts, mmmkay?) I iz surrounded.

  68. 68.

    KDP

    @Ana Gama: Unfortunately, the cash strapped budgets in many states has resulted in an increase in state income taxes, along with substantial annual health insurance premiums. So, while I did see a $20 per paycheck increase after the stimulus/recovery act cut my federal taxes in March of 2009, $5 of that disappeared when California raised state income taxes back in May. This was followed by a 37% increase in my share of health insurance premiums in October. The reduction this caused in my taxable gross resulted in a overall take home reduction of $57 per paycheck from what I took home one year ago before the stimulus/recovery act. I work for a tiny company (5 of us) and have not seen a raise in 4 years, so what has remained the same for me is my gross income.

    If I weren’t paying attention to how that reduction in income occurred and I were paying attention to Beck, Limbaugh, and the Repugs, I might believe that Obama’s policies raised my taxes since my paycheck is smaller now than a year ago. My loss though is the insurance company’s gain, and I want Congress to Pass. The. Damn. Bill.

    On the other hand, I’m still employed, and I make enough to pay my bills, pay my tuition at CSU, and still save money. I am fortunate.

    @Joey Maloney: Good thoughts to folks in Huntsville.

    @Senyordave: I agree, the Dems do an abysmal job of playing up the historical trends in fiscal responsibility by administration.

  70. 70.

    Sly

    There’s nothing inherently wrong about the notion behind the Laffer Curve, even though the LC itself is a laughably simplistic. The problem is that Supply Siders consistently argue that we’re always on the forward slope of the curve (i.e. tax rates are too high) when we’re likely on the backward slope (too low) and have been for decades.

    But arguing that tax rates are too low is political heresy.

  79. 79.

    Tonal Crow

    Hrmm. What happened between 2002-2007? Who was President? Who was running the show in those years? Ah, yeah. The fiscal conservatives.

    And Obama did what to point this out? Well, there was one clause in the entire speech on this:

    And it was the abandonment of [pay-go] that allowed the previous administration and previous congresses to pass massive tax cuts for the wealthy and create an expensive new drug program without paying for any of it.

    Um, is there some rule against saying “Mr. Bush” instead of “the previous administration” and “GOP-run congresses” instead of “previous congresses”? If so, why? Oh, yeah, I know: to preserve “bipartisanship”, which the speech mentions three times.

    Then there was this weak tea:

    Finally, I’ve proposed a bipartisan Fiscal Commission to provide recommendations for long-term deficit reduction…. Unfortunately this proposal – which received the support of a bipartisan majority in the Senate – was recently blocked. So, I will be creating this commission by executive order.

    So, you mean that the Republicans supported it, but some unknown entity — maybe Harry Reid? — blocked it? No? Well then, why didn’t you say that the DEMOCRATS proposed it and the REPUBLICANS — who always scream about deficits, but do their best to inflate them — blocked it? Is there some rule against that?

    The question is, “Are our President learning to use the bully pulpit?” And the answer is, “Not so much.”

  81. 81.

    Liberty60

    @mclaren:
    The miracle of the Invisible Hand of the marketplace is that it can sense impending doom, and thats why in 2008 the economy tanked a year prior to Obama taking office.

    Also, if the economy improves in 2011, it is because the Miraculous Invisible Hand has sensed the presence of Sarah Palin, and is responding favorably with ricocheting starbursts.

  82. 82.

    Bruce Webb

    First used as part of federal budget legislation in 1990, it fell into disuse starting in 1998 and expired completely in 2002

    Well we get the 2002-2007 thing. But what is the significance of 1998? Easy, that is when Social Security surpluses started exceeding General Fund deficits giving us a Unified Budget Surplus. Under Pay-Go that surplus could not be used to justify tax cuts on the General Fund side, they would have to be offset by other spending. So of course the Republican controlled Congress let it fall into disuse, it blocked them from using that for their own spending and tax priorities.

    This is what underlay both Clinton’s “Save Social Security First” and Gore’s “Lock Box”. Lock Box was always a metaphor, there was never a way to physically sequester Social Security cash surpluses, operationally it was a call to maintain Pay-Go meaning that those surpluses could only be used to redeem Debt held by the Public.

    It is almost impossible to believe today but in 2000 we were posed to get our Public Debt driven down to the minimum level needed to keep international markets going. The dollars use as a reserve currency means you need some amount of debt floating around to serve as a vehicle for that purspose, Greenspan wasn’t nuts to worry about the disappearance of the long bond. On the other hand four years of steady debt repayment would have put us in a nice place to finance Universal Single Payer in 2005 even as it drove a stake through the heart of the idea of the Republicans as being the party of Fiscal Responsibilty.

    The Supremes did more than just award the Presidency to a known war-monger, they pretty much wrecked the American dream that animated the New Deal and the Great Society, the dream of shared prosperity. Man the Bush years sucked on so many different levels, the ‘might have beens’ being kind of heart-breaking.

  83. 83.

    Brick Oven Bill

    Re: ‘Imagine-Land’

    Aristotle on Rhetoric. Delving deeper into the links, you can read his views on Mathematics.

    The top tax bracket used to bring in $600 billion in income tax revenues annually. Raising the rate from 35% to 39% would bring in:

    0.04 times $600 billion equals $24 billion

    But this was before the economy fell so the number today is probably something like $15-20 billion.

    Barack has decided to run a budget defect of something like $1.5 trillion, and this does not account for the unfunded liabilities, which probably at least triple this number. But let us pretend we are in Imagine-Land and that there are no unfunded liabilities. We will also pretend that the economy has not fallen. So:

    $24 billion divided by $1.5 trillion equals one point six percent (1.6%).

    So in Imagine-Land, raising the taxes on ‘the rich’ will cover less than two cents of every dollar of government deficits. However, in Reality-Land, it does not cover even a penny.

  84. 84.

    Dino

    from the comments on thehill.com:

    Ronald Reagan didn’t need any stupid PAYGO rule. he was President for 8 years and never once submitted an unbalanced budget OR added to the National Debt. We need to follow in his footsteps.Vote Tea Party in 2010 and beyond.
    BY TEA PARTY PATRIOT on 02/13/2010 at 13:06

    This is so stupid it has to be ironic. Please be ironic or our nation is doomed.

  86. 86.

    Brick Oven Bill

    Re: Transparency

    We will now return to Reality Land.

    People and institutions own the $14 or whatever trillion in debt, but who are these people?

    The ownership is widespread, but most concentrated in the financial sector, you know, those guys who keep showing up on the White House guest lists that the Obama Administration is compelled to report by pesky Citizens.

    To this sector money is lent by the Federal Reserve at near zero interest. This sector then lends the money back to Barack at 3 percent.

    So the creation of government wealth in this country is as such:

    1. The Federal Reserve prints it on the behalf of We the People.
    2. The Bankers buy it at zero percent from We the People.
    3. Barack then buys it on behalf of We the People, at three percent.

    This government creation-wealth, as we have determined, will need to cover over 99% of existing government deficit spending, and 100% of all new spending, in the absence of massive new taxes. Unfortunately for We the People, there is this tax called ‘inflation’.

    You cannot tell me that the Bankers do not have access to the records of Columbia University. We the People, of course, do not. These records are not transparent to us.

  88. 88.

    John O

    OT, but I think I may be hallucinating, so pay me no mind.

    I just saw what I believe to be a remake of “We Are The World” on eleventy channels in a row!

  91. 91.

    Ruckus

    moral majority=neither one nor the other=hypocritical assholes
    fiscal conservatives=neither one nor the other=hypocritical assholes
    I notice a similarity, a theme, a political strategy, a common descriptive phrase

  92. 92.

    mclaren

    @Sly:

    There’s nothing inherently wrong about the notion behind the Laffer Curve…

    There’s everything wrong with the notion of the Laffer Curve. It’s stupid, it contradicts observed reality, it flies in the face of history and it runs completely counter to all known economic theory.

    The Laffer Curve is stupid because it fails the common sense test. Common sense tells you that when you raise tax rates there’s less money left for rich people, so they must work harder to make up the difference. If you lower the top tax rates, rich people don’t need to work as hard, so they don’t, and the economy suffers.

    The Laffer Curve contradicts observed reality because the reality remains that rich people mainly invest their money in tax-free munis and T-bills with gigantic tax loopholes and high-coupon corporate AAA bonds that pay whopping interest rates. Rich people slurp at the public trough by leeching off the public dole in the form of interest paid by taxpayers on tax-free or tax-loophole instruments like T-bills, they don’t primarily invest money in inventing new industries and creating new jobs. Entrepeneurs do that — people who start new businesses with less than 20 employees. Observed reality and hard economic statistics show that startup companies create 2/3 of all new jobs in the economy, and no one decides to start a new company just because the top tax rate declines.

    The Laffer Curve flies in the face of history because economic history irrefutably proves that between 1948 and 1980, the top tax rate never dropped below 70% and sometimes went as high as 92% and the American economy grew like wildfire. But after 1980, when the top tax rate plummeted to 38%, the U.S. economy stopped growing and became stagnant. The reason is obvious: rich people didn’t need to work nearly as hard to make money, so they didn’t. They fell into the lazy bad economic habits they exhibit today, or buying tax-free muni bonds and leeching off the interest instead of making their money by risking it investing inplant and equipment.

    The Laffer Curve is a turd that sticks in the craw of economics. Long past time we vomited it it out. The Laffer Curve is a superb idiot detector — anyone who tries to defend this indefensible example of moronic scamthink needs to get put in the short bus and forced to eat all his food with rubber spoons.

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