With the deficit smashing records, the Democratic-controlled House passed legislation Wednesday designed to make it more difficult to pass tax cuts or new spending programs that would pile even more billions of dollars onto the deficit.
The legislation, passed by a 265-166 vote, would reinstate a "pay-as-you-go" statute that requires tax cuts or new benefit programs be paid for with tax increases or cuts to other programs. If the "pay-go" law is broken and new legislation adds to the deficit, automatic spending cuts would kick in to make up the difference.
By itself, pay-go does nothing to address the government's deficit woes. The deficit for the current year is estimated to top $1.8 trillion, and the Congressional Budget Office projects unsustainable deficits over the coming decade. The pay-go measure wouldn't force lawmakers to find the courage to actually do anything to stanch the flow of red ink; it instead seeks to prevent lawmakers from making it even worse.
"By insisting on offsets and deficit neutrality, pay-go buffers the bottom line," said House Budget Committee Chairman John Spratt Jr., D-S.C. "It is a common-sense rule that everyone can understand: when you are in a hole, stop digging."
If new spending or tax reductions are not offset, there would be automatic cuts in so-called mandatory programs — although Social Security payments, food stamps and the Medicaid health care program for the poor and disabled would be exempt and cuts to Medicare would be sharply limited.
The idea is that the threat of such so-called sequesters would ensure lawmakers wouldn't violate pay-go. Existing rules are routinely waived. But even if pay-go has the force of law, it can be waived.
The bill contains loopholes. For example, it allows lawmakers to renew most of former President George W. Bush's tax cuts — which many Democrats for years have said are unfair and unaffordable — without raising taxes elsewhere.
Despite active support from House Speaker Nancy Pelosi, D-Calif., and Obama, the measure faces difficult prospects. Several powerful Democratic senators are against it.
"Let me be clear: all new mandatory initiatives and all new tax cuts must be paid for," Obama said in a statement following the vote. "It is time to stop the practice of passing today's costs onto future generations. Pay-go was a driving principle behind the move from deficit to surplus in the 1990s, and must be so again today."
Republicans were scathing in their critiques of the plan, noting that the rules don't apply to the appropriations bills that Congress passes each year as member did under a law in place from 1990-2002. And existing pay-go rules aimed at blocking the House from being able to vote on bills that balloon the deficit have been waived a dozen times.
In fact, the bill is weaker than the pay-go regime that was put in place under a bipartisan 1990 budget agreement and renewed twice. It is not accompanied by statutory "caps" on appropriations that Democrats supported in the 1990s and it comes as the House is wrapping up floor action on a set of 12 remarkably generous appropriations bills and just months after a $787 billion stimulus package and other deficit spending.
"This is a fiscal facade," said Rep Paul Ryan of Wisconsin, top Republican on the Budget Committee. "It is designed to disguise the tracks of the explosion of spending, deficits and debt that's occurring this year under this Congress."
It also allows legislation — such as President Barack Obama's health care reform effort — to add tens of billions of dollars to the deficit in the short term if savings are produced years later. It also permits Democrats to exempt annual increases to Medicare's payments to physicians from the pay-go rules.
Victory for moderate Democrats
The vote was a victory for moderate Democrats who have made pay-go their signature issue. A promise by House leaders for a vote on the pay-go legislation was central to winning the votes of moderate "Blue Dog" Democrats for President Obama's budget this spring. And it comes as House leaders are scrambling for Blue Dog support for Obama's health care bill.
"If it helps people support the health care bill, all the better," said Rep. Jim McGovern, D-Mass.
Republicans offered an alternative, rejected 169-259, that would have imposed caps on appropriated spending and require across-the-board spending cuts if the deficit exceeds 3 percent of the size of the economy after fiscal 2013.