The PAYGO Act

On February 4, 2010, Congress voted on two separate bills. The first one was to raise the debt ceiling to $14 trillion. Which is an amazingly high number. But we have been so inundated with these huge numbers so much lately that we fail to appreciate them.

Currently the debt ceiling is $12 trillion. So this is $2 trillion more. Consider that the average round trip flight to Brisbane, Australia from New York City is $1275. (Brisbane is a beautiful vacation spot along Australia's Gold Coast.) And say you wanted to stay at a nice hotel there. The Brisbane Hilton is $225 a night. (That's in Aussie dollars, of course.) And figure we might want to spend about $200 a day for meals, sightseeing trips and gifts for friends back home. That totals $4250 for the whole trip. $2 trillion will give us enough for 475 million trips. That is enough for every man, woman and child in this country to take a nice week long vacation. And then some. Maybe even enough to get all those Americans from whatever city they live in or near to New York in the first place. Maybe we can spring foa Broadway show to boot.

So raising that debt ceiling another $2 trillion isn't something to sneeze at. Or take lightly. Which by the way, passed the House a mere 217-212. (Note, no Republicans voted for it.)

But did Congress take it lightly? Well, let us look at the second vote they had that day.

The second measure they voted on was PAYGO, and it passed 233-187. (Again, no Republican votes.) It would be interesting to note at this point that 24 Democrats voted for PAYGO but not for the increase in the debt ceiling. Political maneuvering in anticipation of a tough mid-term election season? Perhaps, since they can then go back to their constituents and say they voted against raising the debt ceiling.

So, PAYGO. What is it? TeachMeFinance.com tells us it is "

What this essentially means is that if Congress goes over the spending limits they have given themselves in the form of how it impacts the deficit, a whole series of cuts takes place. It is a dollar for dollar thing. If they spend too much and the deficit goes over a dollar (just a simplification here), then something else gets cut so the deficit goes down a dollar

Sounds pretty reasonable from a fiscally responsible point of view, right? But is it really?

Here's what their telling you. House Budget Committee Chairman John Spratt (D-SC) says in a statement issued Sunday February 7, 2008: "The Budget Enforcement Act expired in 2002 and was not reinstated. Without these process rules in place, the budget plunged, as a matter of record, from a surplus of $236 billion in 2000 to a deficit of $413 billion in the year 2004. When Democrats took back the House, we made PAYGO a rule of the House the first day we convened the 110th Congress."

Here's what they are NOT telling you. In 2001, this country endured the worst man-made disaster (read TERRORIST attack) in history. Along with this huge spending on our military, national defense and the creation of a new department in government (Homeland Security), we still had politicians (Republican and Democrat) still spending like drunken sailors.

Here's what else they are telling you. (Also from Spratt.) "Statutory PAYGO works, it´s proven to work. It reins in new entitlement spending, and it requires new tax cuts to be offset, as well. Both tend to be long lasting - easy to pass, hard to repeal. By insisting on offsets, and by insisting on deficit neutrality, PAYGO buffers the bottom line. The terms are complex, but at its core, it´s a common-sense rule. When you find yourself in a hole, quit digging."

And here is what they are not telling you. According to the House Joint Resolution 45, the PAYGO Act, "If the uniform percentage calculated under the prior sentence exceeds 4 percent, the Medicare programs described in section 256(d) of BBEDCA shall be reduced by 4 percent and the uniform percentage by which the budgetary resources of all other nonexempt direct spending programs are to be sequestered shall be increased, as necessary, so that the sequestration of Medicare and of all other nonexempt direct spending programs together produce the required outlay savings."

What this means is that if Congress breaks its promise of PAYGO, then the OMB will make certain "budgetary offsets". And the first to be hit is Medicare and then "all other non-exempt direct spending programs."

Why do you think they will punish those on Medicare if they break their promises? Because it is easier to do this to people who won't or can't complain. And who are those other non-exempt direct spending programs? It is hard to estimate; but the list of exempt programs is pages long.

Let's just look at a few under Section 11, Exempt Programs and Activities. Compensation of the President, Fannie Mae, Foreign Military Sales Fund (huh?), Office of Thrift Supervision (this exists?), Payments to Judiciary Trust Funds, Payments to the widows and heirs of deceased Members of Congress (this is different than social security?), Salaries of Article III Judges, united Mine Workers of America (various funds), Civil Service retirement and disability fund, pensions for former Presidents, Overseas Private Investment Corporation. These are just a few on this list.

Why not cut the salaries of Members of Congress, the President and his Cabinet and Administration. We could probably save a few programs that directly impact American's lives. Perhaps even keep Medicare from coming under the OMB knife. And maybe provide incentive for them to not overspend in the first place. When it is other people's money and lives, it is just a bunch of numbers. but if it is their paychecks and livelihoods, how willing do you think they will spend?

And then there is the little item tucked away in Section 7, subsection (f) number (1) section (K). It mentions the phase-out of personal exemptions and the elimination of itemized deductions for anyone making under $200,000 single filer and $250,000 joint filer. What the heck is that all about? Why is it in here? And who thought of putting it there?

What makes PAYGO so infuriating is that, in the past, they kept trying to pass it and then kept getting caught by the public. Yet they kept trying. And this time they will succeed. Not a difficult, task considering all the things going on in the country. It has already snuck past the Senate and House and the joint resolution process. It is on its way to President Obama's desk. It is actually on the White House website under Pending Legislation. But to get to that point where you can view it and make a comment is tedious. First you have to click on the Featured Legislation link. Once there you have to look to the left for the Pending Legislation link. And then you will find it. Here you can read it and/or make a comment.

But first you have to know about it.

Another really big problem with this, and lots of other legislation coming down the pike, it is written in such a way as to make it impossible to repeal.

Sources

Thomas.gov - H J Res 45
http://www.thomas.gov/cgi-bin/query/D?c111:4:./temp/~c111Hf9d92::

msnbc.com
http://firstread.msnbc.msn.com/archive/2010/02/04/2195168.aspx

TeachMeFinance - Definition of PAYGO
http://www.teachmefinance.com/Financial_Terms/pay-as-you-go.html

The White House
http://www.whitehouse.gov/