The PAYGO law mercifully expired in 2002. Yet Congress brought it back as a rule in 2007. Instead of sequestrations and scorecards, the rule simply required that each new entitlement-expansion or tax-cut bill be deficit-neutral.
The results were the same. After much fanfare, Congress waived PAYGO every time it proved even slightly inconvenient. The lawmakers waived it to extend unemployment benefits. They waived it to create a $63 billion veterans’ entitlement. They waived it for the $787 billion “stimulus” bill. House Speaker Nancy Pelosi, California Democrat, suggested that PAYGO be waived for any bill she feels will help the economy.
Even when PAYGO wasn’t waived, Congress resorted to gimmicks for compliance. The lawmakers passed an expansion of the State Children’s Health Insurance Program (S-CHIP) that scored 10 years of tax increases, but only the first five years of the new spending. They enacted a farm bill with timing shifts, funding cliffs and other gimmicks to create the illusion of deficit-neutrality. Spending skyrocketed and PAYGO was again exposed as a joke, a fraud and a gimmick.
Which is why Mr. Obama’s call to bring back statutory PAYGO cannot be taken seriously. The same president who made a mockery of the PAYGO rule on S-CHIP and the “stimulus” bill cannot credibly claim he will suddenly enforce a PAYGO statute.
In fact, his PAYGO proposal is designed to fail. By walling off nearly all entitlement programs from any possible sequestration cuts that would enforce PAYGO, the president statutorily guarantees that a sizable sequestration cannot occur. So if the massive health care bill isn’t deficit-neutral, a PAYGO sequestration (even if allowed) may not be able to fully offset the costs later.
Enacting PAYGO is worse than doing nothing. It provides lawmakers with a convenient talking point and taxpayers with a false sense of security on budget reform. Better to focus on real spending caps and other reforms that could actually rein in spending and deficits.
• Brian Riedl is the Grover M. Hermann Fellow in Federal Budgetary Affairs at the Heritage Foundation.