You are here

Statutory PAYGO: A Return to Fiscal Responsibility

On February 4th, the House passed the Senate amendments to H.J.Res. 45, the Statutory Pay-As-You-Go Act 2009. By restoring ‘pay-as-you-go' (PAYGO) budget discipline -- which has been the rule of the House since Democrats took control in 2007 -- as the law of the land, we are returning to the basic rule for every family budget: you don't spend money you don't have. This bill requires Congress to offset the costs of tax cuts or increases in entitlement spending with savings elsewhere in the budget, except for a few items extending current law. If the net effect of all legislation enacted during a session of Congress increased the deficit, there would be an across-the-board reduction in certain mandatory programs. 

After years of fiscal recklessness by President Bush and Republicans, President Obama and Congress are committed to getting our budget under control - a crucial part of our plan to strengthen the American economy:

Republican Budget Busting Initiatives Vs. Fiscally Responsible Obama Agenda

This measure is similar to the bipartisan PAYGO law in place in the 1990s, which helped reverse huge deficits of the Reagan-Bush years, create budget surpluses, and produce an economic boom:

Who left us with huge deficits

Key provisions:

Tough Budget Choices on Taxes and Spending

  • Require that all new policies reducing revenues or expanding entitlement spending enacted during a session of Congress be offset over five and ten years.
  • Force a serious examination of wasteful subsidies in the budget and tax loopholes that can be eliminated to offset more worthwhile programs.
  • Force advocates of tax cuts to acknowledge the costs and show how they would pay for them.
  • Require any future extension of upper income tax cuts to be offset.

Needed to Ensure that We Can Make long-teRm Investments

  • Ensure that we can afford to fund America's most important priorities consistently for future generations.
  • Exempt any spending on discretionary programs funded in appropriations bills, such as: LIHEAP, WIC, Head Start, Housing assistance, and Pell grants.

Realistic and Enforceable

  • Allow legislation extending designated current policies to be extended without offsets:
  • Medicare physician payments for five years.
  • Alternative Minimum Tax for two years.
  • Extension of child tax credit, marriage penalty relief and reduction in income tax rates for taxpayers with incomes below $250,000.
  • The current estate tax exemption and rate for two years.
  • Provide for the use of Congressional Budget Office estimates.
  • Include an exemption for legislation designated as emergency, as Congress did in the American Recovery and Reinvestment Act.

Tough Enforcement that Protects Key Benefits

  • Establish an enforcement mechanism: with across-the-board cuts in non-exempt mandatory programs at the end of the year if Congress has not paid for the costs of all new policies enacted during the year. Certain designated programs are exempt from the sequester, including:
    • Social Security
    • Medicaid
    • Food Stamps
    • Veterans
    • Other programs targeted to low-income families