Wednesday, July 22: H.R. 2920 – Statutory Pay-As-You Go Act

The measure sets in law pay-as-you-go (PAYGO) rules that would require legislation affecting mandatory spending or tax revenue to be budget neutral, i.e., not increase the deficit. This will only provoke more spending and tax increases.

It requires the Office of Management and Budget (OMB) to maintain a “ledger” of enacted legislation and determine whether presidentially ordered sequestration (automatic, across-the-board spending cuts) would be required to bring the federal budget back into balance.

The bill exempts four tax and spending policy areas from the OMB’s calculation to determine if sequestration is required: any extension of middle-class tax cuts; any “patch” to prevent the alternative minimum tax (AMT) from affecting more taxpayers; changes to the estate tax; and measures to prevent cuts in Medicare payments to doctors.

The measure allows the president to rescind congressional designations of spending as “emergency,” thereby including such spending in OMB’s calculations on the deficit impact of legislation.

CBO has estimated that the bill would increase the deficit because legislation in the four exempt policy areas would be figured on the basis of changes from current policy, not from current law, and because of other provisions of the measure that would change how the deficit is calculated.

Ryan (R-WI) Amendment:

Highlights of the amendment, which would replace the underlying bill, are as follows:

Discretionary Spending Controls: The amendment establishes limits on discretionary spending over the FY 2010-2014 period.  The limit would allow discretionary spending to grow at the rate of inflation, which is what is currently assumed in CBO’s baseline (though Congress usually enacts a higher spending level). 40% of the federal budget consists of discretionary spending, and the underlying bill completely exempts such spending from the PAYGO requirement.

Total Spending Limit: The amendment establishes a total spending limit, expressed as a percentage of GDP, for each year over the ten-year budget window.  Through FY 2013 the limit would accommodate CBO’s baseline.   In 2009, federal spending will amount to approximately 28% of GDP, according to the most recent projections.  Under the spending limit set by this amendment, this would decline to 21.7% of GDP by 2013.  It would stay at that level (or 21.8% in a couple years) for every succeeding year.   Spending above the limit would be subject to sequestration.

Deficit Limits: The legislation establishes deficit limits, expressed as a percentage of GDP, as follows:  8% of GDP in 2010, 6% of GDP in 2011, 4% of GDP in 2012, and 3% of GDP in 2013 and in each succeeding year.  These limits would also be enforced via sequestration.  According to the Budget Committee Republicans, these limits provide for $2.4 trillion of deficit spending compared to the President’s budget.



Published in: on July 23, 2009 at 3:31 pm  Leave a Comment  

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