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Obama announces PAYGO initiative
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In a press conference Tuesday with Congressional Democrats, President Barack Obama announced his "Pay-As-You-Go" (PAYGO) initiative as a plan to help balance the federal budget. The basic design of the plan requires Congress to make cuts in spending in one area of the budget equal to the amount allocated for every new increase in spending elsewhere. The theory of PAYGO is that new spending programs will create no additional deficits to the federal budget.
A few observations:
It is only a step towards true budget reform
While I agree that PAYGO is a good policy to follow, in practice it will not solve the major spending problems plaguing Congress. PAYGO was statutorily in effect from 1991-2002, and the net effect was over $700 billion in additional public debt. While this number is pocket change compared to the trillions of dollars Obama has proposed to spend only 5 months into his tenure, it is certainly not evidence of the structural spending discipline that will alleviate our fiscal concerns going forward.
It does not remedy Congress' fundamental spending problem
PAYGO does not address our elected leader's core disease: uncontrolled spending. For purpose of analogy, if a compulsive gambler wants to eliminate his problem, his best solution is to stop gambling. Few counselors would instruct the compulsive gambler to cut his spending on food, utilities, and children's clothing to avoid going bankrupt. That would be absurd, because it does not address the central problem--it only patches it up with a band-aid. Similarly, if Obama genuinely desires a balanced budget, he would be wise to curb, if not eliminate, wasteful spending. This would include runaway entitlement spending, foolish government bailouts, and self-serving pork projects.
Exemptions, exemptions, exemptions
Like most legislation inside the Beltway, PAYGO is marred with myriad exemptions and loopholes that will make the initiative ineffective. It exempts all discretionary spending, and only addresses new entitlement spending, so Medicare, Medicaid and Social Security will not be affected. A similar PAYGO plan was put into effect in 2007 as a Congressional rule (which can be waived whenever Congress feels the need), but was waived in order to pass the stimulus package earlier this year. During the speech, after making reference to Congressional Democrat's inability to obtain former President George W. Bush's support for legislation that utilized PAYGO rules, Obama made a predictable jab at Bush by saying, "I want you all to know, you now have that support." Not surprisingly, this was followed by smug laughter and applause by the puppets surrounding him. What Obama failed to disclose during his political barb was that the Democratically-controlled Congress waived PAYGO to pass the stimulus bill. So, in a turn of events, will a president who supports PAYGO legislation be overridden by a Congress that waives it? If we are to expect true change, then PAYGO must be a clean bill that is not loaded with exemptions, because we all know Congress will use them.
Conclusion
Overall, PAYGO is a step in the right direction, but will only work if it is devoid of exemptions and accompanied by meaningful, large-scale spending reforms.
