Is The PAYGO Rule Fiscally Responsible?

On Thursday, the US Senate voted to restore pay go rules on a party line vote. President Obama praised the restoration of the PAYGO rule. Obama supporter Andrew Sullivan used the vote as a club to attack Republicans. Republicans opposed the restoration of pay go calling it a backdoor attempt to raise taxes. However, the PAYGO rule is at best a dual edged sword. While PAYGO is an excellent for controlling and limiting deficit spending, it does very little to limit the size and growth of the Federal government.

The PAYGO or “pay as you go” rule simply calls for any increase of mandatory spending or reduction in revenue (ie. taxes) must be offset by decreases in discretionary spending or increases in revenue (taxes). Mandatory spending is things like Medicaid, Medicare, Social Security, pay for Federal employees, paying debt, and other welfare programs such as Food Stamps and Veterans benefits. Mandatory spending is nearly 60% of the Federal budget. Discretionary spending is everything that Congress has to pass legislation to authorize.

How PAYGO Is Fiscally Responsible:

The PAYGO rule requires spending to be budget neutral and budgets to be balanced. This is generally a good thing since it does not require increasing debt which has to be paid back by taxpayers. It requires that if government cannot pay for programs it appropriates, either taxes must be raised or programs and spending be cut. It also forces Congress to prioritize which programs are important them and can lead to much needed reforms in the Federal government which reduces its cost to taxpayers and ultimately the power it wields. In a Congress where the majority of members put limited government and the interests of taxpayers first, PAYGO can be a very important tool in the rollback of the Federal government.

However, PAYGO Also Promotes Big Government:

The PAYGO rule also promotes the welfare state and big government. The PAYGO rule only calls for cuts in so-called discretionary spending while leaving untouched the welfare programs that are so-called mandatory spending. This in affect leaves nearly 60% of the Federal budget (and growing every year) untouched. In order to ultimate reduce the size and scope of the Federal government, reforms must be enacted to Medicaid, Medicare, Social Security and the other welfare programs which are “mandatory”. The cost of not doing anything to reign in mandatory spending will mean ultimately higher taxes and more poverty as jobs and opportunities are lost by a revenue hungry Federal government.

In addition, Republicans are right when they suspect that PAYGO in the hands of the current Congress and President is nothing more than a tool to raise taxes. Other than various gimmicks that do nothing to address the fiscal problems this nation will have, the Democrats (and Republicans alike for that matter) have shown no serious interest in reducing the size of government.

Finally, PAYGO has a loophole. It can be suspended for “emergency appropriations”. For example, if Congress and the President want to have another round of bailouts and nationalizations, all they have to do is declare an emergency.

Ultimately, PAYGO can be an excellent tool for fighting waste, fraud, and corruption; however it is useless in the hands of this Congress and President because they have neither the will nor the ability to cut the Federal budget where it really matters.

I’m one of the original co-founders of The Liberty Papers all the way back in 2005. Since then, I wound up doing this blogging thing professionally. Now I’m running the site now. You can find my other work at The and Rare. You can also find me over at the R Street Institute.