Hooray for PAYGO or Not

With the re-authorization of the “Pay As You Go” Bill that helped to create a quote unquote surplus and a balanced budget for the first time in centuries in America, is finally being brought back. Finally Congress spending habits will be reigned in but is it too little too late since “PAYGO” will not have any effect on the TARP legislation, the bailouts, the stimulus package or the omnibus budget bill passed over the last 10 months.

Yes “PAYGO” will not have any effect or checks & balances over the $700 billion bank bailout, the nearly $50-80 billion dollar auto industry bailout, the $787 billion quote unquote stimulus package or the $410 omnibus budget bill that was layered with pork. Therefore why is “PAYGO” being passed now and being taunted as a fiscal responsibility measure that will help America reign in its budget deficit when it doesn’t reign in things that will affect our budget deficit for the next 10-15 years?

Don’t get me wrong, I’m happy that “PAYGO” is finally being re-authorized with all the measures that helped to keep America’s national debt from sky rocketing even higher from 1991-2002 and that helped to balance the nation’s budget for the first time in centuries. However it is clear that if “PAYGO” doesn’t have any effect on the trillions of dollars our government has already spent in the last 10 months with much of it already being wasted and unaccounted for than our nation even with all the good that “PAYGO” can do, we will still have billions if not trillions unaccounted for that will cause our national debt to continue to grow for at least 4-6 more years.

“PAYGO” should have been the first priority of this administration from day one because if spending out of control got us into the economic disaster we are in than why have we continued to spend out of control even since the Obama administration has taken over the economic disaster. “PAYGO” reigns in spending and if it was implemented as soon as Congress was sworn in than President Obama could have signed it on January 21, 2009 as his first piece of legislation signed. However “PAYGO” was not implemented from day one because it would have prevented the other half of the TARP money from being spent and it would have put a stop to the billions of dollars in loans to the auto industry that are now bailouts because it doesn’t have to be paid back since Chrysler and General Motors both failed for bankruptcy and are still going to receive billons of more dollars in government funds to fund the bailouts.

So if President Obama thought he'd score some easy political points by endorsing new PAYGO legislation to control deficit spending, he was sadly mistaken. Although PAYGO--budget-speak for "pay-as-you-go"--seems to limit Congress' ability to cut taxes or raise spending, the initial reviews were unkind and sometimes harsh. However,” this is like quitting drinking, but making an exception for beer and hard liquor," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, an advocacy group.

Don Wolfensberger, head of the Congress Project at the Woodrow Wilson Center noted that 48 percent of Americans already disapprove of Obama's handling of budget deficits (46 percent approve). "Obama will have to convince lawmakers that his own legislative ambitions will not exceed their political will or ability to increase taxes or cut entitlement benefits," he said. That task is definitely not easy but Obama is known to inspire others so hopefully his charisma can charm lawmakers to see things his way otherwise, PAYGO will be seen as a complete failure in the eyes of many American’s especially if the national debt continues to grow or is higher than what it was when Obama inherited it.

Now Senator Judd Gregg (R-NH) and Congressman Paul Ryan (R-WI), the ranking Republican members of the Senate and House Budget Committees, were predictably critical, arguing that "waving the PAYGO banner has served as a convenient political cover for the majority as it exploits loopholes and continues its big-government spending ways." But even Senator Kent Conrad (D-ND), chairman of the Budget Committee, was unenthusiastic. PAYGO, he said, "does not address the deficits and debt projected under existing policy." This is argument that needs to be addressed in regards to PAYGO because if PAYGO doesn’t deal with the deficits and debt projected projects that are currently under way than no matter how well PAYGO works, it will only prevent our national debt from skyrocketing even higher than it could be at the rate our government is currently spending.

PAYGO is one of concepts that sounds great on paper--but means much less in practice. Under the PAYGO law that was in effect from 1991 to 2002, Congress was required to pay for any new tax cuts or new entitlement benefits (in say, Social Security or Medicare) by either raising other taxes or cutting other entitlement spending. In theory, this seems a guaranteed way to balance the budget. Obviously, it isn't. The Congressional Budget Office has projected that Obama's budgets would run a collective deficit of about $11 trillion between now and 2019.

Why doesn't PAYGO work? For starters, the Obama proposal has huge loopholes. It would exempt a) renewing the 2001/2003 Bush tax cuts; b) patching the Alternative Minimum Tax (AMT); c) updating doctors' Medicare payments; and d) changing the estate tax. It was these omissions that inspired MacGuineas' objection. "Exempting these measures from PAYGO would increase the ten-year deficit by over $2.5 trillion," she said. With interest, the figure could be $4 trillion, according to Conrad.

But even without Obama's exceptions, PAYGO is often toothless against budget deficits. For starters, it applies only to tax cuts and entitlement spending--programs like Social Security, Medicare, food stamps, agricultural subsidies or unemployment insurance when recipients automatically qualify for benefits by fulfilling eligibility requirements (by being unemployed, for instance). Totally exempted is "discretionary spending" for defense, education, environmental protection and many other programs. In 2008, discretionary spending totaled $1.135 trillion, or 38 percent of federal spending.

Next, normal increases in entitlement spending (more beneficiaries, higher health costs, etc.) also aren't covered. So, for example, most of the increase in Social Security and Medicare spending resulting from the impending retirement of baby boomers doesn't count for PAYGO. All that counts are increased benefit levels from existing legislation: If Congress raised Social Security benefits, those increases would presumably be subject to PAYGO. However, when PAYGO becomes a political nuisance, Congress suspends it. According to analyst Brian Riedl of the conservative Heritage Foundation, Congress waived the requirements repeatedly in the 1990s. "Entitlement spending actually grew faster during the 12 years of PAYGO (1991-2002) than in the 12 previous years (1980-1991)," he says.

Nonetheless balancing a budget for the Federal Government has been a pipedream for the same reason that California is in trouble. People want to take, but loath to give. A significant part of the deficit we are dealing with is due to the dire economic situation that has been germinating for many years under several administrations (exacerbated by a war or two in progress) but has now borne its fruit. The economic meltdown brought fears of a recession that was expected to be the mother of all recessions, neigh a depression that would last as much as a decade. Two administrations developed bailout plans that cost huge amounts of money and generated tremendous controversy. But low and behold the economic pundits are now saying that the turnaround may be in sight. So it appears that while the economic downturn has been very painful with many unfortunate, and some deserving victims, at least we aren't seeing the catastrophe everyone thought would occur as recently as 6 or 7 months ago.

How are we going to pay for this respite, because it cost a lot of money? Well, that is what no one wants to do. Pay more taxes, even after the economy has recovered, Hell No. Cut "waste" is the answer, but it is still a case of one man's trash is another man’s gold. Hard decisions need to be made and we don't seem to want to make them at either a national or personal level sometimes. No one wants to see their lifestyle decline and we are not encouraged to accept that either. Thus it would be political suicide. We have only ourselves to blame, but it is great to have politicians (ours are fine, it's those others we need to kick out) as the scapegoats. It's either those damn Republicans/Conservative politicians or Democrats/Liberals politicians we never look in the mirror to see the real culprits.

That’s why PAYGO is not a hooray until it addresses the budgetary problems that will increase the national debt in the years ahead. We have already borrowed too much from future generations and it is up to us the people to finally rein in our government spending as well as our own as we as a nation and as a people finally practice fiscal responsibility at all levels of our lives.