Pay-go’s promise routinely broken by Washington

The pay-as-you-go rules President Obama is resurrecting as a solution to runaway federal spending have been repeatedly violated by Congress and the White House, allowing hundreds of billions of dollars to be spent without the required spending cuts or tax increases.

After some early successes in the 1990s, the pay-go rules have been waived or gamed for political convenience to the tune of more than $1 trillion in deeper deficits, with most of it coming under President George W. Bush and a Republican Congress.

From hiding new spending in emergency legislation to waiving the rules to canceling the penalties, Congress and the White House became expert at finding ways to avoid draconian spending cuts or tax increases.

Mr. Obama’s budget chief is well aware of the history and its potential impact on the president’s new pledge, calling pay-go rules the “broken window theory of budgeting.”

“Just like broken windows have been shown to increase crime and harm outcomes, if you don’t have important constraints … it leads to a sense that anything is possible in a fiscally irresponsible way and undermines a lot of what we’re trying to do,” White House Of fice of Management and Budget Director Peter R. Orszag said.

But outside analysts say pay-go isn’t broken windows, it’s just broken.

“Pay-go is designed to fail. Congress cancels the enforcement, and even if they didn’t there are virtually no programs that are available to be cut to bring these policies into balance,” said Brian Riedl, a budget analyst at the Heritage Foundation. “It’s unworkable.”

He said the law in place through the 1990s specifically excluded Social Security and anti-poverty programs from the mandatory cuts and prevented cuts in Medicare by more than 4 percent. That leaves too few options for real cutting, if Congress ever were required to live up to its obligations.

Pay-go was created as part of the 1990 budget deal President George H.W. Bush reached with the Democratic Congress - the one that broke his “no new taxes” pledge - and was renewed in the 1993 and 1997 budget deals. The pay-go law expired in 2002, though the Senate maintained its own pay-go rule and the House imposed one on itself when Democrats took control in 2007.

Both the law and the congressional rules were designed to keep Congress from expanding or creating new tax cuts or entitlement programs without finding offsetting spending cuts or tax increases.

The rules were easily waived, but the law itself proved effective - particularly with the threat of sequestration, which meant a mandatory cut to entitlement programs to balance out new spending.

At its most effective, that threat alone kept lawmakers from coming forward with new spending or tax cuts, said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

“I’ve talked to many members who were regularly crafting their policies to be pay-go compliant because they knew full well the threat of sequestration was something they didn’t want to bump into,” she said.

For a while, that drastic punishment helped keep new entitlement spending under control, and was at least a part of the reason deficits dropped, according to the Congressional Budget Office, Congress’ official scorekeeper.

But when times improved in the late 1990s, discipline disappeared, and both Congress and the White House regularly began to waive the rules, piling on spending and tax cuts.

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