Pay-go gets passed, then it gets bypassed

The ink is barely dry on the pay-as-you-go law, and Democrats are seeking to bypass it to enact parts of their job-creation agenda.

Democratic leaders said extensions of unemployment insurance and COBRA healthcare benefits should be emergency spending that isn’t subject to the pay-as-you-go statute, which requires new non-discretionary spending to be offset with spending cuts or tax increases.

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With current extensions of unemployment and COBRA benefits set to expire at the end of the month and the jobless rate still near 10 percent, Democratic lawmakers want to pass the extensions quickly, without having to find offsets for the costs.

This year, facing record deficits and a debt that has exceeded $12 trillion, Democrats touted the new pay-go requirements as a necessary step to get spending under wraps. President Barack Obama signed the pay-go bill into law on Feb. 12 and Democrats are ready to waive those requirements to help get the economy going.

“Assistance to unemployed workers during periods of high unemployment are always classified as emergencies,” a House Democratic leadership aide said. “That’s why they were done that way under the [House] jobs bill passed in December — while everything else in the bill was paid for.”

The six-month extensions of the unemployment and COBRA benefits made up roughly a third of the House Democrats’ $154 billion jobs package.

Included in the jobs bill as emergency spending were another $23.5 billion in state Medicaid payments and $2.6 billion for an expansion of the child tax credit and small-business loans. The rest of the package — infrastructure spending and fiscal aid to state and local governments struggling to keep workers — was paid for by redirecting money set aside for bank bailouts.

Senate Majority Leader Harry Reid (D-Nev.) is also pushing for emergency extensions of the unemployment and COBRA benefits not subject to pay-go requirements.

“He believes that providing assistance to families who have suffered a job loss is critical to getting the economy back on track,” said Reid spokeswoman Regan LaChapelle. “Extending unemployment compensation and COBRA health insurance premium assistance are important for these families and certainly meet the definition of ‘emergency spending’ contemplated in the pay-go legislation.”

Republicans voted en masse against the pay-go legislation, criticizing Democrats for including language that would allow exemptions to it. Sen. Judd Gregg (R-N.H.) said Democrats’ move to bypass pay-go using emergency exemptions proves that the pay-go law is just a “political statement, not a substantive event.”

“They continue to claim some sort of fiscal discipline ... when in fact they basically keep spending money like drunken sailors,” Gregg said.

Some Democrats are also skeptical of the need to bypass the requirements.

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Former Rep. Charlie Stenholm (D-Texas), a fiscally conservative Blue Dog and longtime champion of pay-go, said job-creation legislation should contain no exceptions to the pay-go restrictions. He urged lawmakers to find spending cuts to offset any new costs.

“You can find there are so many places in discretionary spending that have been increased tremendously over the last two three four years that can be cut,” said Stenholm, now a member of the Peterson-Pew Commission on Budget Reform and senior policy adviser at Olsson Frank Weeda.

For now, centrist Democrats are leaning toward passing unemployment and COBRA benefits as emergency spending.

Rep. Jim Matheson (D-Utah), the Blue Dog Coalition’s top spokesman, said any spending deserving of the emergency tag must be temporary. He hasn’t decided whether unemployment and COBRA benefits are emergency spending, but said that the current situation, where the unemployment rate is at 9.7 percent, “is a pretty significant situation.”

Republicans did vote for an extension of unemployment and COBRA benefits last fall, and Gregg said that he could vote for the next extension if it’s paid for.

But GOP members appear to be split over whether they should meet pay-go requirements. A jobs bill drafted by Senate Finance Committee Chairman Max Baucus (D-Mont.) and Sen. Chuck Grassley (R-Iowa) calls for three-month unemployment and COBRA insurance extensions that are only partly offset.

Grassley’s office did not respond to inquiries.

Lawmakers will have to go on record as to whether the extensions qualify as emergency spending, as the pay-go law requires that any emergency designations must be approved in separate votes by the full House and Senate.