Steady as you pay-go

The Democrats’ Election Day victories, securing the White House and bigger congressional majorities, were historic. But history will take care of itself; it’s the future that is difficult and in doubt.

Governing is the tough part.

The trickiest challenge Democrats will face is sticking to their commitment to pay-as-you-go budgetary rules.

Pay-go is a Washington Beltway term not widely debated on the talk shows, but it goes to the heart of Democratic thinking about fiscal responsibility.

Nevertheless, sticking to the promise to offset the costs of bills rather than running up the deficit will be very difficult in the 111th Congress.

A group of conservative House Democrats called Blue Dogs insisted on pay-go and Speaker Nancy Pelosi (D-Calif.) embraced it. President-elect Barack Obama has also endorsed its principles.

Pay-go allowed Pelosi to reject pricey bills she did not like, but it also created major headaches.

House Democrats passed Alternative Minimum Tax (AMT) bills this Congress that were paid for, but Senate Republicans thwarted them. Democrats subsequently waived pay-go to pass the annual AMT patch bill, citing GOP obstructionism.

Leadership in the House and Senate also waived pay-go on the financial rescue bill, as well as the economic stimulus measure. This is natural enough, for offsetting stimulus legislation is counterproductive on its face. Some Democrats argue, however, that it is easy to call any bill “stimulative.”

The bottom line is that Democrats have made exceptions to the rule on pay-go over the last couple years, and Blue Dogs want that to stop.

Obama has proposed offsets for his domestic policy initiatives, including raising taxes on those making over $250,000 a year. But offsets are hard to find — especially uncontroversial ones.

If Democrats can’t pass the AMT with offsets in 2009, they will not be able this time to blame the GOP; they have a strong working majority in the upper chamber and they will own future failures as much as future successes.

Democrats will not be able to keep all their campaign promises. In his acceptance speech, Obama noted that he may not be able to do everything in his first term.

Will there be pay-go exceptions in the next Congress? If not, will liberal members accept a more modest policy agenda? Or will Democrats take on huge battles with powerful industry groups in search of offsets?

One way or the other, Democrats will need to have a long discussion about the future of pay-go. Otherwise, it will become a fierce intra-party fight.