PAYGO Won’t Work
by Brian Riedl
Issue 134 - June 24, 2009

President Barck Obama recently introduced a Pay-As-You-Go ( PAYGO) proposal as a means to control government spending , and Congress is likely to give it serious and immediate consideration.

Yet PAYGO has proven to be more of a talking point than an actual tool for budget discipline. Consider that:

1) PAYGO has never been enforced.

• During the 1991-2002 round of statutory PAYGO, Congress and the President still added more than $700 billion to the budget deficit and ***simply cancelled every single sequestration that would have enforced PAYGO.*** Even if Congress had wanted to enforce PAYGO during that period, they had already exempted 97% of all entitlement spending from sequestration cuts.
• Since the 2007 creation of the PAYGO rule, Congress has waived it numerous times in order to add $600 billion to the deficit.

2) PAYGO's design is flawed.

• PAYGO exempts all discretionary spending, and would also allow all current entitlement programs like Social Security, Medicare, and Medicaid to continue growing on autopilot. It affects only new entitlements or tax cuts that may be created in the future.
• PAYGO allows expiring entitlement programs to be extended without offsets, but not expiring tax cuts. So its biased in favor of higher spending and higher taxes.
• Even if PAYGO were fully enforced, entitlement spending would still grow 6 percent annually, and discretionary spending could grow without limit.
• PAYGO is merely a distraction from policies that could actually provide budget discipline, such as statutory spending caps.

For a further discussion of why PAYGO will not work, see my “Obama’s PAYGO Law Would Not Slow Spending or Budget Deficits” at: http://www.heritage.org/Research/Budget/wm2312.cfm

Brian Riedl is Grover M. Hermann Fellow for Federal Budgetary Affairs at The Heritage Foundation