House Dems not winning over critics with pay-as-you-go bill

House Democrats’ pay-as-you-go bill does not impress its Senate counterparts or various budget experts, who argue the legislation isn't as strong as the rules now in place.

The statutory pay-go measure, expected to win approval in the House, would codify into law requirements that Congress pay for new mandatory spending with tax increases or cuts to other programs.

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But senior Democrats in the upper chamber aren't eager to take up the legislation, arguing that it will do little to rein in deficits.

Senate Budget Committee Chairman Kent Conrad (D-N.D.) said that the bill is actually weaker than the pay-go rules currently in place because it won't require offsets for big-ticket items — the extension of tax cuts expiring next year, a patch keeping the Alternative Minimum Tax (AMT) from hitting middle-income Americans and continued Medicare physician payments — that Democrats have committed to doing.

Those items would also add up to trillions in debt if they aren't paid for, Conrad said.

"I am absolutely not interested in something that waives $4 trillion in costs in exchange for statutory pay-go," Conrad said Tuesday. "That does not strike me as any kind of a good deal or productive."

Conrad's concerns echoed those of the independent Congressional Budget Office (CBO), which said that provisions in the pay-go bill would lead to more spending or less revenue than under current pay-go requirements in the House and Senate.

Extending the tax cuts, the AMT patch and Medicare physician payments would lead to approximately $3 billion in new debt over the next decade, according to the CBO analysis of the original bill proposed by the White House. The pay-go bill allows for mandatory programs with scheduled expirations to continue, adding at least $25 billion to the deficit, CBO said.

William Hoagland, a former Senate GOP budget aide and the vice president of public policy at Cigna Corp., said that Congress should maintain the current rules and not exempt the tax cuts and other expensive items from pay-go provisions.

"That way, you force the Congress to at least vote to waive [pay-go] if nothing else, and not play this charade of that it doesn't exist," Hoagland said.

House Democrats are still willing to fight for the bill, which is sponsored by Majority Leader Steny Hoyer (D-Md.) and has 167 Democratic co-sponsors.

They argued Tuesday that pay-go law was a key to the government surpluses of the 1990s and is necessary to again rein in deficits. That pay-go law expired in 2002. The pay-go rules put in place when Democrats retook Congress in 2007 have been waived several times, including when Congress passed the $787 billion stimulus and an increase in veterans' benefits.

In response to the complaints from the Senate, Hoyer's office noted that the upper chamber has stifled past attempts by the House to pay for expensive items, including the AMT patch.

If the Senate wants to pay for those items exempted in the pay-go bill, “the House leadership would fight to do the same in the House," said Katie Grant, Hoyer's spokeswoman.

Grant also noted that Hoyer's proposal has addressed some concerns of critics. One change Hoyer made to the original pay-go proposal authored by the White House was to limit how much of the expiring tax cuts will be exempted from pay-go constraints. The move would save $700 billion.

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The White House came out in support of Hoyer's bill Tuesday, saying that it would help achieve President Obama's goal of halving the $1.8 trillion 2009 deficit by the end of his first term.

"Enacting statutory pay-go would complement this effort and strengthen the budget process," the White House said in a statement. "While pay-go does not solve all budgetary problems, it was the lack of such discipline that led to a near-doubling of the long-term deficit over the course of just a few years in the early 2000s."

The push for the bill comes as House leaders are trying to get fiscally conservative Blue Dog Democrats to support healthcare reform legislation. Hoyer and Speaker Nancy Pelosi (D-Calif.) were pressing for statutory pay-go in April, partly in response to the $3.6 trillion budget resolution, which included more discretionary spending than Blue Dogs had wanted. Hoyer and Pelosi have said that they will not consider any legislation dealing with the tax cuts, Medicare physician payments or the AMT patch unless the Senate considers the pay-go legislation.

But Senate Majority Whip Dick Durbin (D-Ill.) signaled that a pay-go bill won't be taken up anytime soon in the upper chamber, which is also working through healthcare legislation, a Supreme Court nomination and a climate change bill that the House passed but which hasn't been considered in Senate committees.

"I can't see how we can work [pay-go] in for August," he said. "We have so many things waiting for us when we go back."

-- This story was updated at 2 p.m. on July 22.