News Release
Spratt Statement on Senate Passage of Statutory PAYGO Legislation
FOR IMMEDIATE RELEASE
January 28, 2010
“I’m pleased to see the Senate join the House and make “pay-as-you-go” black-letter law.
“At the outset of the 1990s, Congress passed the Budget Enforcement Act to ensure that the Budget Summit Agreement was carried out. Among its provisions was a new rule called ‘pay-as-you-go’ or PAYGO for short. Critics disdained our resort to budget process. They accused us of dodging the hard choices we had to make if we were going to wipe out the deficit. But by the end of the 1990s, the budget was in surplus for the first time in 30 years; and it was clear that budget process rules like PAYGO played a big part in our success.
“Republicans were in the majority in 2002 when the Budget Enforcement Act expired, and they chose not to reinstate PAYGO, knowing that it would impede passage of their tax cutting agenda. Without the process rules, the budget plunged from a surplus of $236 billion in the year 2000 to a deficit of $413 billion in the year 2004.
“When Democrats took back the House, the reinstatement of PAYGO was at the top of our agenda. We made PAYGO a rule of the House the first day we convened the 110th Congress.
“The Obama Administration and the current Congress have inherited a colossal deficit, swollen to accommodate needed recovery measures. As these measures pull us out of recession, we must turn our attention on our longer-term fiscal fate.
“Statutory PAYGO works because it reins in new entitlement spending and new tax cuts. Both tend to be long lasting – easy to pass, hard to repeal. By insisting on offsets and deficit neutrality, PAYGO buffers the bottom-line. Its terms are complex, but at its core is a common-sense rule that everyone can understand: when you are in a hole, stop digging.
“Statutory PAYGO will put more rigor into the budget process, and help us reduce the deficit, both short and long-term.”
Background
On June 9, 2009, President Obama proposed legislation making the “pay-as-you-go” (PAYGO) rule statutory. On June 17, 2009, House Budget Committee Chairman Spratt joined House Majority Leader Steny Hoyer, OMB Director Peter Orszag, the Blue Dog Coalition, and others concerned about fiscal soundness in introducing the bill in the House. On July 22, 2009, Congressman Spratt managed the bill on the House floor when the House passed the measure by a bipartisan vote of 265-166.
PAYGO requires that new legislation affecting mandatory spending or tax revenue be "budget neutral," or more specifically, that it not increase the deficit. Statutory PAYGO rule would be enforced through sequestration – or automatic, across-the-board spending cuts.
The House bill requires the Office of Management and Budget (OMB) to maintain a PAYGO ledger and to determine at the end of each year whether across-the-board spending cuts would be needed. If the total impact of new mandatory spending and revenue legislation results in a net cost over either a five- or 10-year time frame, then the President would order an across-the-board cut of certain mandatory programs. Expected extensions of certain current policies scheduled to expire – such as middle-income tax cuts, estate tax relief, Alternative Minimum Tax (AMT) relief, and measures to prevent cuts in Medicare payments to doctors – do not trigger sequestration.
Statutory PAYGO was first put in place with bipartisan support by the Budget Enforcement Act of 1990, and was renewed on a bipartisan basis in 1997. The statute expired in 2002 and was not reauthorized by the Republican majority in Congress.
Without PAYGO, the budget plunged from a surplus of $236 billion in the year 2000 to a deficit of $413 billion in the year 2004.
In 2007, Democrats regained the majority in Congress and established PAYGO rules in the House and Senate.
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