PAYGO a MEGO but Obama, Hoyer on board

With voters and financial markets increasingly worried about an explosion of federal debt, President Barack Obama will stage an event at the White House this afternoon. The purpose: to advertise his concern and let the public know he intends to do something about it.

Actually making a difference, however, won't be easy.


Obama will be promoting pay-as-you-go budget rules in new spending and tax measures, known as PAYGO for short.

House Democratic Leader Steny Hoyer will be among a group of 40 lawmakers, including centrist and conservative Democrats, attending the event. The Maryland congressman said today that he'll be the main sponsor of Obama's proposal in the House.


PAYGO is a MEGO (My Eyes Glaze Over)--a classic, processy Washington deal, lacking in sex appeal. In other words, it's something that most voters know little, if anything, about and could care less. Which means it just might be one of those things that could have a big impact on peoples' lives.

The theory behind PAYGO is (deceptively) simple: Congress can only spend a dollar if it saves a dollar elsewhere.

Hoyer, at his weekly press conference today, made the argument for why people should care. Obama will elaborate this afternoon.

PAYGO, a Republican invention, requires Congress to approve new taxes or spending cuts to pay for any new benefit programs. The idea has been credited with helping restrain deficit spending in the 1990s, when Bill Clinton was president (and the last time the federal government ran a surplus). Under PAYGO if Congress doesn't act to offset the expense of any new benefit, benefit programs are automatically cut.

Hoyer blames Republicans, who controlled the White House and Congress for much of the George W. Bush era, with abandoning fiscal restraint because, otherwise, "they could not afford their tax cuts."

The Marylander has been on a fiscal responsibility crusade lately, arguing that Washington needs to start moving on the looming tsunami of red ink, in the form of steadily rising costs of government benefit programs, which will be aggravated by the retirement of the Baby Boom generation.

PAYGO, he said, "is not the answer" to reducing the deficit. "It is only one tool in the fiscal responsibility toolbox."The Obama/Hoyer plan, which is intended to make PAYGO the law of the land (and not merely a procedural rule), faces several problems: First, implementing it. Second, preventing it from becoming shot full of holes, to the point that it would be little more than a fig leaf for Washington to keep spending money it doesn't have.

It starts out with loopholes for the future costs of some of the most expensive items in Obama's stimulus package--including the annual fix for the Alternative Minimum Tax, designed to protect many in the middle class, and Obama's own middle-class tax cut. Also getting an exemption: Medicare payments to doctors and estate tax provisions of the Bush tax cuts.

Those loopholes highlight the ultimate weakness of PAYGO--Congress can, and does, regularly approve exceptions (waivers), which weakens its effectiveness. Blue Dog Democrats--those on the conservative end of the liberal House Democratic caucus--are among those who object to those loopholes (some Blue Dogs will also be among the guests at the White House ceremony).

Hoyer pointed out that the House leadership has said it would not accept any measures for final approval that contain Senate provisions which don't comply with PAYGO rules.

Which raises another significant hurdle: there is no indication at this point that the Senate is willing to go along with the plan to write PAYGO rules into law. Exactly one senator, freshman Democrat Claire McCaskill of Missouri, was on the White House list for today's ceremony.

Hoyer indicated that it would be up to Obama to use his bully pulpit to bring reluctant senators along.


The president seems motivated to act--by slippage in his poll numbers. Today's event is the second in two days to focus on rising public discontent with his economic policies (on Monday, he talked about ramping up the implementation of stimulus spending this summer).

A number of recent public opinion surveys show that the public gives Obama his lowest marks on handling the economy (even as they become more optimistic about economic trends), though his popularity and overall job approval ratings remain high.

"Americans have become increasingly less positive about Obama's handling of the economy in recent months, and are most negative when asked to say whether they approve of his handling of the federal deficit and federal spending," according to Gallup.

Republicans were quick to underscore that point.

"It seems a tad disingenuous for the President and Speaker Pelosi to talk about PAYGO rules after ramming trillions in spending through Congress proposing policies that create more debt in the first six months of this year than in the previous 220 years combined," House Republican Whip Eric Cantor of Virginia said in a statement. "It's as if the Administration and these Democrat leaders are living in an alternate universe. The quickest way to save money is to stop recklessly spending it. The Administration's sudden focus on PAYGO seems more driven by polling and PR strategy than a serious commitment to fiscal discipline."

Translation: Don't expect Republicans to go along with this particular plan.

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