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Economic News, Data and Analysis

PayGo, etc.

There are 3 to 4 big issues likely to emerge as big fights in the Senate’s version of the budget: 1) PayGo, 2) Medicaid cuts in reconciliation, 3) drilling in ANWR, and 4) a provision creating budget process restrictions on any entitlement spending increase of more than $5 billion over any of the 4 10-year periods between 2015 and 2055…
On PayGo…

The Decembrist
One vote in the Senate will be of profound importance, however: On Wednesday, Senators Chafee and Feingold are expected to offer an amendment to the budget resolution restoring the “Pay-as-you-go” rules, known as PAYGO, which will require Congress to pay for any further tax cuts with offsetting tax increases or spending cuts. The budget resolution as passed by the Senate Budget Committee lasts week instructs the Senate Finance Committee to come back with tax cuts totaling $70 billion, which will add to the deficit.
If the PAYGO rules, which were rejected on a party-line vote in the Budget Committee, pass, those tax cuts will either have to be paid for, or they will be subject to a “point of order” in the Senate which will require 60 votes.
More likely, if the PAYGO amendment passes in the Senate, it will not pass in the House, and the two houses will not be able to agree on a budget resolution, which is not the end of the world. It happened last year. Without a budget resolution, though, there can’t be a budget reconciliation bill. The effect is the same as having a budget resolution with PAYGO in it: Any further tax cuts will have to be subject to full debate in the Senate, and can’t be rammed through with 50 votes.
Few things are more arcane than congressional PAYGO rules. And yet, little is more important, especially right now. A few weeks ago, in writing about Goldwater, I noted that the genius of Rove and his followers was that they had figured out how to separate the ideological conservatism that Americans liked from the operational conservatism — the real cuts in government — that Americans did not. PAYGO rules are a way of forcing those two back together. If Republicans are serious about cutting taxes and making government smaller, they must be willing to come forward simultaneously with the cuts they are willing to make and bear the consequences. Or, if they do not want to make cuts but still want to cut taxes for the top 0.2% of the population, they must be willing to say whose taxes they are willing to raise to pay for those cuts.

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