WASHINGTON -- The Concord Coalition said today that the pay-as-you-go (PAYGO) rule for tax cuts and entitlement expansions included in the budget resolution now before the House and Senate fails to provide meaningful fiscal discipline because it expires after just one year and carves out a $27.5 billion exemption for unspecified tax cuts.

“If you want to deprive PAYGO of any real meaning, the best two methods are to limit its duration and carve out exemptions. This budget resolution does both.  It sends an alarming signal that despite a projected deficit of over $400 billion this year, and projected deficits for as far as the eye can see, Congress is not yet taking our nation's deteriorating fiscal outlook seriously,” said Robert L. Bixby executive director of The Concord Coalition. 

“Limiting PAYGO to one year, with or without exemptions, provides virtually no fiscal discipline. PAYGO can only be effective if it establishes an ongoing standard. Enacting PAYGO one year at a time essentially allows Congress to exempt any tax cuts or entitlement expansions from fiscal scrutiny so long as it does so in one-year increments. Like tax cut sunsets or the Medicare ‘donut hole,' one-year PAYGO seems explicitly designed to let Congress avoid hard choices  ¾ exactly the opposite of what PAYGO is intended to do,” Bixby said.

Concord also expressed concern with the following aspects of the proposed PAYGO rule:

• Its limited duration is made even weaker by the exemption for $27.5 billion in tax cuts, which would also be given procedural protections, such as limited amendment and immunity from filibusters, under the reconciliation process. Exemptions to PAYGO inherently create a bad precedent because there is no principle to guide the decision. In this case, the exemptions were apparently created because of a political consensus about which existing tax cuts will probably be extended with or without PAYGO. Such a standard has unlimited potential for expansion in future budget negotiations.

• There is also a question of exactly what is being exempted. Designating a specific dollar amount for reconciliation does not, by itself, put any restrictions on the policy options that can be enacted within that limit. While there seems to be a general understanding that the $27.5 billion exempted from PAYGO will be used for a one-year extension of the $1,000 child credit, the 10 percent tax bracket and the “marriage penalty” relief, there is no such restriction in the actual language of the reconciliation instructions. Thus, the $27.5 billion could be used to enact or extend any tax cuts at any time over the five–year period of the budget resolution. 

“A much more disciplined approach is needed to begin the road back to a balanced budget. While budget rules can be changed annually, a multi-year PAYGO provision in this year's budget resolution would at least ensure that next year's budget debate begins with PAYGO in place. The burden of enacting change would be on those seeking to get around PAYGO and not on those seeking to enforce it,” said Bixby.

The Concord Coalition is a nonpartisan, grassroots organization dedicated to balanced federal budgets and generationally responsible fiscal policy. Former U.S. Senators Warren Rudman (R-NH) and Bob Kerrey (D-NE) serve as Concord's co-chairs and former Secretary of Commerce Peter Peterson serves as president.

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