No-go for pay/go?

WE SAY As it stands, it's only a start.

President Obama has called for a reinstatement of the pay-as-you-go rules, commonly known as pay/go, which would require Congress to offset entitlement spending increases and tax cuts.

Basically, for an increase in spending in certain areas of the budget, Congress has to find a way to make up for every dollar spent – tax cuts or spending – through either budget cuts or tax increases.

Pay/go was first used in 1990 and is largely responsible for the budget surpluses during the Clinton administration. However, pay/go was scrapped in 2002 by former President George W. Bush to get his tax cuts through. Also, Bush’s passage of the Medicare Prescription Drug Modernization Act in 2003 wouldn’t have made it through – at least not without budget cuts or tax increases.

Although it’s a bit ironic to hear our current president, who’s running a huge deficit, talk about fiscal discipline, pay/go is a long time coming.

Mandatory spending, largely because of Medicare and Social Security, is eating away at a larger and larger portion of our budget. That’s money we could be saving or spending elsewhere. Spending does need to be reeled in; but short of finding the solution to health care inflation or readjusting the law to determine who’s eligible for such programs, we’re not going to be able to fix them.

Obama’s pay/go only applies to tax cuts and to policy changes that would increase entitlement spending (like the prescription drug plan). But how much we spend on entitlements is determined by how many people are eligible by law.

Even if we don’t add more politically inclinded sprendthrift policies to entitlements, we’ll still end up drowning in them. Until we can find a way to slow rising health care costs – the biggest controllable contributor to entitlements’ costs – we’ll still end up paying more for them each year.

If we aren’t going to revise the eligibility requirements for these entitlements, we need to start cutting spending elsewhere. Unfortunately, Obama’s pay/go rule doesn’t address discretionary spending, which also increased in his budget.

As for discouraging tax cuts, there is evidence that Bush’s tax cuts actually increased tax revenue on those affected by as much as 40 percent. If that’s the case, then blaming his tax cuts, as Obama’s pay/go looks to imply, for creating budget deficits is unfair. Bush continued to spend more than he collected, but that doesn’t mean he was collecting less.

There might be another time in the future when tax cuts would be wise, but pay/go shuts all political windows.

Of course, any rule change has its limits, but Obama’s pay/go doesn’t do as much as we were hoping. At most, it only prevents Congress from making more bad decisions but doesn’t patch up the existing holes in our budget.

Instead it seems like word-dropping to entice every deficit hawk and increase confidence at a time when everyone is wondering where the stimulus money is and whether the United States will be downgraded from a AAA credit rating.