- The Washington Times - Thursday, July 26, 2007

July is a month of reckoning for congressional Democrats. That may be a bit too apocalyptic, but signs abound that as political rhetoric rubs against fiscal reality, it is igniting some intra-party brushfires. Governing is always more challenging than campaigning, and the Democrats’ new budget rules are only complicating their task. The six-month-old majority is learning a hard lesson — it’s tough to avoid the “tax and spend” label without curbing your appetite for one or the other.

Democrats won the affection of swing voters last fall by convincing them “we can do better” than Republicans on a host of matters, including fiscal discipline. They promised to reinstitute so-called “pay-as-you-go” (PAYGO) budgetary rules, which Republicans allowed to lapse in 2002, meaning any new mandatory spending or tax cuts required offsets by either new revenues or spending cuts. So far, so good. Democrats received kudos from columnists like David Broder of The Washington Post, who wrote in April that reprising these rules was a sign that “Democrats are imposing some real spending discipline on themselves.” But PAYGO, which sounded great on the campaign trail, has turned out to be a governing nightmare for the Democrats.

“They regret they ever instituted these rules,” a former Democratic House staffer told me. “It is creating a host of headaches trying to enact their agenda.”

Republicans harbor some of their own reservations about PAYGO. The rules force lawmakers to “pay for” tax cuts, when many in the GOP believe the stimulative effect of reducing levies mean more, not less, revenue. Furthermore, Republicans predicted mixing the Democrats’ PAYGO rules with the liberals’ appetite for spending was a recipe for higher taxes. The GOP’s instincts were correct. Now even some Democrats recoil at the prospects of multiple votes this summer and into the fall to increase taxes.

These problems erupted into full view in the House last week over how to move forward on reauthorizing the State Children’s Health Insurance Program (SCHIP). The Capitol Hill newspaper Roll Call reported the Democratic Caucus was split over a proposal to pay for SCHIP by raising cigarette taxes by 61 cents per pack. Several of the more fiscally conservative Blue Dogs voiced objections. “I don’t think Democrats should mention the T-word for two or three years,” Rep. Jim Cooper of Tennessee was quoted as saying in the story. But Mr. Cooper’s version of fiscal responsibility is not shared throughout his caucus.

PAYGO is proving nettlesome in other areas as well. With gavels in hand for the first time in 12 years, Democrats support changing a host of other policies that require either offsetting spending cuts or new taxes. For example, they want to shift the focus of energy policy, providing new tax incentives for renewable technologies and projects. The House energy bill authorized a host of new “green” energy incentives, including some that test the limits of credibility. One of my favorites authorizes new bonds to purchase Lexus Hybrids for the Beverly Hills police department.

They also want to help more middle-class Americans avoid paying higher taxes under the Alternative Minimum Tax. But those modifications also demand other tax increases or spending cuts under the PAYGO rules. Finally, even this year’s farm bill may mean the House Ways and Means Committee must find another $4 billion in revenue to offset spending. “The committee’s become the ATM machine for the Democratic agenda,” a senior Hill aide told me yesterday.

Because cutting government spending is not high on the Democrats’ priority list, it limits their options when reshaping government policy. “When Republicans did operate under PAYGO,” a Republican leadership aide told me, “we always looked for spending cuts, not tax increases, to meet the requirements.” Democrats seem to more instinctively look to raising revenue. And when you blend an appetite for a banquet of new spending and other policy initiatives with PAYGO requirements, it translates into more taxes.

“I think what is bothering a lot of Democrats is the cumulative effect of PAYGO,” a Democratic lobbyist said. He is right. The sheer number of tough tax-increase or spending-cut votes stacking up over the next few months has Democrats sweating and Republicans licking their chops. Restraining new spending is one way to relieve the pressure, but that page seems missing from the Democrats’ playbook.

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