Obama signs Pay-Go law but also raises federal debt ceiling

President Barack Obama on Saturday congratulated Congress for restoring a requirement that the federal government spend only what it can afford — a day after authorizing $1.9 trillion more federal debt.

Obama used his weekly radio address to report that he signed into law on Friday night the legislation commonly known on Capitol Hill as “Pay-Go,” which has been used sporadically over the past 20 years by congressional budget-writers. Obama also repeated his call for $20 billion in budget cuts, a freeze in certain government spending, and the creation of a fiscal commission.

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But it was the pay-go legislation that highlighted the address. Obama credited the concept with the balanced budgets of the 1990s and its abandonment for the deficits of the past decade. He signed the law as part of a larger measure that raised the government’s debt ceiling from $12.4 trillion to $14.3 trillion, as Congress authorized in a divisive vote last month. Obama’s address did not mention the debt ceiling increase.

“In a perfect world, Congress would not have needed a law to act responsibly, to remember that every dollar spent would come from taxpayers today – or our children tomorrow,” Obama said of the pay-go law.

“But this isn’t a perfect world. This is Washington. And while in theory there is bipartisan agreement on moving on balanced budgets, in practice, this responsibility for the future is often overwhelmed by the politics of the moment. It falls prey to the pressure of special interests, to the pull of local concerns, and to a reality familiar to every single American – the fact that it is a lot easier to spend a dollar than save one. That is why this rule is necessary.”

The pay-go concept has a rocky past on Capitol Hill. First used as part of federal budget legislation in 1990, it fell into disuse starting in 1998 and expired completely in 2002. It was re-established as a House rule — not a law — in early 2007, but was again waived in 2008.

Obama used his State of the Union address last month to urge Congress to restore the rule and codify it into law. The Senate did so on Jan. 28, followed soon after by the House.


The pay-go legislation requires the government to fund any spending increases in entitlement programs by spending cuts or tax increases. But there are many exemptions — benefits like Medicare, Social Security, or annual provisions such as the Medicare “physician fix” that benefits doctors. It also would not apply to direct spending that is included in annual appropriations spending bills.

Obama did not pass up the chance in the address to repeat a short list of his common defenses on his administration’s fiscal record, noting that the George W. Bush administration destroyed budget surpluses that had been carefully built up by President Bill Clinton, and that he inherited a severe recession and budget deficit when he took over from President Bush.

“Ten years ago, we had a big budget surplus with projected surpluses far into the future. Ten years later, those surpluses are gone,” he said. “In fact, when I first walked through the door, the government’s budget deficit stood at $1.3 trillion, with the budget gap over the next decade projected to be $8 trillion.”