A federal budget primer

Pay-as-you-go (PAYGO)

With the recent return of deficit spending by the U.S. federal government, it pays to remind folks that there's a simple rule to return fiscal sanity. It's not a balanced budget amendment and it's not a line-item veto (the former having never been passed by Congress *gasp, surprise* and the latter being ruled unconstitutional).

Instead, we need to return to PAYGO. This rule, passed as part of the 1990 Budget Enforcement Act, stated that any new spending or any tax cuts had to be budget neutral. So, if I want more money for roads, I have to raise taxes or take money from education. If I want a estate tax cut, I have to cut programs or raise taxes somewhere else. This rule includes entitlement spending increases (such as Social Security).

Overriding PAYGO would require a supermajority vote (60 votes in the 100-seat Senate).

In other words, PAYGO means you have to pay for things with real money and not borrowing. It means that renewing President Bush's tax cuts (responsible for more than 60 percent of the current deficit), would involve raising more revenue or cutting spending a similar amount. [That's almost $400 billion in credit card tax cuts - good luck]

The resistance of many conservatives to this proposal (it was recently defeated in the U.S. Senate with 51 votes - all Republican - against it) is hilarious. In fact, it's worth quoting an excerpt from a Heritage Foundation memo verbatim:

Merely retaining the "tax relief" [quotes added] that Americans now enjoy would, under PAYGO, require 60 votes in the Senate and a waiver in the House. To avoid this supermajority requirement, lawmakers seeking to prevent tax increases would have to either: A) raise other taxes; or B) reduce mandatory spending by a larger amount than has ever been enacted. Option A is still a net tax increase (raising one tax to avoid raising another), and option B is probably politically unrealistic.

To summarize the Heritage Foundation, PAYGO would force lawmakers to:
a) repeal tax cuts that were never paid for OR
b) actually follow "starve the beast" theory and cut government spending - a task that is "politically unrealistic" in large part because Americans don't actually want their government programs cut.

The kicker is the Heritage memo's conclusion that lawmakers should support the House plan (sans PAYGO) for its $13 billion in savings by cutting "waste, fraud, and abuse in entitlement programs." Maybe we should cut the $400 billion in credit card tax cuts instead.