PAYNOGO

Eakinomics: PAYNOGO Washington has a debt problem. If you want to know why, take a gander at the House this week where the Democratic majority is expected to vote to wipe clean the Pay As You Go, or PAYGO, scorecard. This complete shirking of any budgetary discipline is as common as it is bipartisan. PAYGO is the budgeting rule that requires any increase in mandatory spending or reduction in taxes to be offset so as to not increase deficits over the 10-year budget window. Both the House and Senate rules have incorporated various flavors of PAYGO over the years. The Statutory Pay-As-You-Go Act of 2010, however, made PAYGO the law of the land. Suppose, for example, you passed something like the American Rescue Plan (ARP) that raised $2 trillion (in round numbers) in new spending. Under statutory PAYGO (in simple terms), the Office of Management and Budget (OMB) keeps both a 5-year and a 10-year scorecard. For the 5-year scorecard, it would enter the average annual increase ($400 billion) in each of the years. Similarly, it would enter $200 billion (the annual average over 10 years) in each year. If the end of a session of Congress occurred without these balances being offset, OMB would have to do an across-the-board sequester of mandatory spending (with some exceptions) equal to the larger ($400 billion) of the two scorecards. That mandatory spending sequester never happens. Sometimes Congress builds exemptions into a law. Sometimes spending that would otherwise add to the scorecard gets designated as “emergency” spending and, thus, exempted. (Believe it or not, the cost of a decadal Census was once designated as emergency spending. I guess it just snuck up on them.) Occasionally Congress has savings scored (this happened, for example, with the Affordable Care Act); these are banked in the scorecard and net against any positive balances. And sometimes when scorecards have positive balances – the ARP or the Tax Cuts and Jobs Act – Congress agrees to wipe them out in must-pass legislation. Notice that adherence to PAYGO does not solve any budget problem; PAYGO can only stop existing budget problems from getting worse. But Congress cannot avoid spitting the bit on PAYGO, so the problem always gets worse.