President’s Call for ‘Pay-As-You-Go’ Rules Has Implications for Reform
On Tuesday, President Obama said he will send Congress a proposal that would revive "pay-as-you-go" rules and require all new spending programs and tax cuts to be paid for within 10 years, the AP/Philadelphia Inquirer reports (Taylor, AP/Philadelphia Inquirer, 6/10).
Under the rules, the White House Office of Management and Budget would tally the total cost of policies enacted by Congress each fiscal year, and if there is a negative balance, the administration could "sequester" pre-approved funds to bring the total cost to zero (Clarke, CQ Today, 6/9).
Obama's proposal would allow health care reform and other programs to run up large deficits in their first years, but Congress would have to find a way to cover those costs within 10 years.
In addition, the plan would provide for more than $3.5 trillion worth of exemptions from pay-go rules over 10 years (Montgomery, Washington Post, 6/10).
For example, lawmakers still would be able to delay a scheduled cut in Medicare payments to physicians (Youngman/Alarkon, The Hill, 6/9). The rules also would not apply to discretionary spending measures.
Administration Comments
Obama said, "The 'pay-as-you-go' principle is very simple. Congress can only spend a dollar if it is saves a dollar elsewhere."
OMB Director Peter Orszag said that pay-go "embodies the common-sense principle that you shouldn't dig the hole any deeper," although it likely would not reduce the national debt (Gay Stolberg, New York Times, 6/10).
Lawmakers' Response
House Majority Leader Steny Hoyer (D-Md.) said, "The president is looking forward to signing a bill. This is one of the important steps toward restoring fiscal responsibility" (Clarke/Epstein, CQ Today, 6/9).
House Speaker Nancy Pelosi (D-Calif.) said, "We are fully committed to enacting pay-go rules into law with enforceable consequences" (Koffler, Roll Call, 6/9).
Members of the fiscally conservative House Blue Dog Coalition also praised the announcement (Parnes, Politico, 6/9).
However, critics said that the bill would allow too much spending to be exempted from the rules and noted that Congress has a long history of waiving pay-go requirements for new programs (New York Times, 6/10).
Senate Budget Committee Chair Kent Conrad (D-N.D.) said, "I'm not waiving pay-go for $3.5 trillion of items, much of which I think ought to be paid for," adding, "I don't think at this point we can afford not to pay for those very large expenditures" (Washington Post, 6/10).
Antonia Ferrier, spokesperson for House Minority Leader John Boehner (R-Ohio), said, "The administration and congressional Democrats are making it abundantly clear today that tax increases are very much on the horizon to pay for new programs like health care" (Roll Call, 6/9).
Outlook
Hoyer said the House Budget Committee will hold hearings on the bill within the next two weeks with the goal of moving it to the House floor quickly (CQ Today, 6/9).
Broadcast Coverage
On Wednesday, NPR's "Morning Edition" reported on Obama's pay-go proposal. The segment also looks at Obama's efforts to promote his health reform plan (Liasson, "Morning Edition," NPR, 6/10).
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