Lawmakers press OMB head on pay-go policy exemptions

A bipartisan group of lawmakers grilled White House Budget Director Peter Orszag at a hearing Thursday over the administration’s flexibility on a new pay-as-you-go law that would allow for trillions of dollars in exemptions.

The administration is asking lawmakers to pass legislation that would require any new federal program to be paid for either by cutting spending or raising taxes. But the White House has agreed to exempt a few big-ticket items that have added to the nation’s budget deficit.

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During the House Budget Committee hearing, Rep. Xavier Becerra (D-Calif.) noted the exemptions will cost more than $3 trillion over 10 years. Policies that won’t be subject to pay-go restrictions under Obama’s bill include the extension of middle-class tax cuts enacted during the Bush administration, funds to keep the Alternative Minimum Tax from hitting middle-income Americans and Medicare payments to physicians.

“If we don’t extend a number of these [exemptions], we could see an increase in the reduction of the deficit,” said Becerra, the vice chairman of the House Democratic Caucus.

Orszag said items were exempted because neither lawmakers nor the White House have come up with ways to pay for them. Those policies also have broad support from both Democrats and Republicans in Congress.

But Rep. Lloyd Doggett (D-Texas) suggested lawmakers consider letting more of the tax cuts, championed by President George W. Bush, expire, and not just the ones for those Americans making more than $200,000.

“We’re basically pre-judging policy in favor of the Bush tax cuts and against other necessary measures,” Doggett told Orszag.

The Obama administration, House Democratic leaders and conservative Blue Dog Democrats say the legislation is one step toward reining in record deficits, which will reach $1.8 trillion this year and exceed $600 billion over the next decade.

A pay-go law was in place in the late 1990s, when the government ran a surplus. The law’s backers note that the law was waived in 2002, a move that allowed the GOP-controlled Congress and White House to enact expensive new measures — a prescription drug program and more tax cuts — that cost hundreds of billions and weren’t paid for. A pay-go law would have required Congress to pay for those items, Orszag noted.

“It’s not a panacea, but it is a big chunk,” he said.

House Majority Leader Steny Hoyer (D-Md.), who has called on the House to take up the bill in July, said the pay-go law is necessary to stem the increase in debt.

“By reducing the amount of money spent on interest payments on the debt, we will be better able to make investments in areas that make our economy strong, such as healthcare, energy and education,” he said.

The measure has less support in the Senate; though Majority Leader Harry Reid (D-Nev.) has backed it, Sen. Kent Conrad (D-N.D.), whose Senate Budget Committee would mark up any pay-go bill, has criticized the measure for exempting expensive items.

But Hoyer and House Speaker Nancy Pelosi (D-Calif.) have pledged not to consider any new tax bills from the Senate unless the upper chamber takes up pay-go legislation. The House leaders’ pay-go promise came in response to the $3.6 trillion budget resolution, which called for discretionary spending levels higher than Blue Dog Democrats wanted.

Republicans said that the pay-go law is too weak to stem the Democratic trend of higher spending. They criticized the bill for including too many exemptions and for not capping increases in discretionary spending.

“I sense the administration is trying to get credit for something that doesn’t quite live up to its billing,” said Rep. Jeb Hensarling (R-Texas).