Back in May 2009, we reported on the status of President Obama's efforts to enforce pay-as-you-go budget rules. These policies have existed in different forms over the years, but the general principle is that they require new spending to be balanced by spending cuts, revenue increases or a combination of the two.
At the time, we rated the promise Stalled. Congress had conveniently exempted itself from its own PAYGO rules when it passed the economic stimulus bill by exploiting an "emergency" provision.
It's been more than a year since our last update, so we wanted to see whether anything had changed.
First, a little background. On February 12, 2010, President Obama signed the Statutory Pay-As-You-Go Act of 2010 into law. The legislation increased the public debt limit to $14.2 trillion (from $12.4 trillion) and, more pertinently, instituted a new PAYGO statute. Under this statute, the Office of Management and Budget keeps track of any new spending and tax law changes. Then, at the end of the year, it checks whether spending increases and tax cuts have been offset with spending cuts or tax increases. If not, there is an automatic across-the-board spending cut. The law includes numerous exemptions, including a provision that allows Congress to declare the spending as "emergency" and thereby reduce the spending total.
It is important to note that this PAYGO law is operationally different from the PAYGO rules in the House and the Senate. Waiving the House PAYGO rule, for example, requires a majority vote. Waiving it in the Senate requires the support of 60 Senators. To bypass the PAYGO law, however, Congress would need to pass legislation explicitly directing the President not to enforce mandatory spending cuts for that year. Lawmakers now have to abide by both their own chamber rules as well as general statutory PAYGO.
We'll examine how well the president and Congress have been adhering to the PAYGO principle.
Starting with their own rules, we found that both the House and the Senate regularly waive such requirements. Take the Temporary Extension Act of 2010, signed by President Obama on March 2, 2010. The legislation temporarily increased unemployment benefits and health care subsidies. Section 11 of the bill states that the law is designated "as an emergency for the purposes of pay-as-you-go principles." In short, that means that most of law is exempt from the PAYGO requirement. The Continuing Extension Act of 2010, which included further extensions of expiring programs and which was signed into law on April 15, 2010, included an identical exemption.
As for "statutory PAYGO," the latest OMB "scorecard" suggests that Congress has not violated the PAYGO statute. Jason Peuquet from the Committee for a Responsible Federal Budget, a bipartisan public policy think tank, told us, however, that a "large portion of this so far has come from emergency spending ... so although lawmakers have technically abided by PAYGO, the law exempts trillion of dollars." Indeed, if you add up the many exemptions within the PAYGO law, you'd get anywhere between $2 trillion and $3 trillion in spending and tax cuts over 10 years added to the budget without the requirement that they be offset, Peuquet said.
President Obama promised to enforce pay-as-you-go budget rules. We'll give him points for passing the Statutory Pay-As-You-Go Act of 2010, which so far has been technically adhered to. But the law is riddled with exemptions, and the Congress seems to have a habit of waiving its own PAYGO rules. We'd like to wait and see how Congress and the president respond to recommendations due in December 2010 from the bipartisan deficit commission created by President Obama in February, 2010 before we issue a final ruling. But for now, we're keeping it Stalled.