Pay-as-you-go won’t halt rising deficit
President Barack Obama declared Wednesday that he wants Congress to pass legislation to make pay-as-you-go budgeting the law. Under his plan, most new spending would have to be offset by budget cuts in other areas or by tax increases. The idea is to stem the growth of the federal deficit.
Well great. U.S. taxpayers may applaud the presidential dedication to deficit control. But they will be doing so from the budget barn door, as they watch the burgeoning deficit gallop rapidly away.
As has been pointed out by many folks, President Obama and the current Democratically controlled Congress inherited a deficit nurtured during eight years of the Bush administration and predominately Republican majorities in Congress. But, during the current economic crisis,
Obama and the congressional Democrats have made the deficit really blossom.
A report from the Treasury Department Wednesday said the deficit grew by $190 billion in May, and now stands at almost $1 trillion for the year. It is expected to be $1.84 trillion by October. And the deficit is projected to grow much more in the coming decade.
Furthermore, those projections are understandably ambiguous about the impact of such Obama-pushed undertakings as national health-care reform and cap-and-trade energy legislation. While bills related to both those endeavors include provisions to raise revenue to help cover the increased costs, it’s far from certain they will be adequate to cover all of the costs.
Obama is right that “paying for what you spend is basic common sense.” It’s the way most individuals and businesses budget. If they have to borrow money for major purchases, the responsible ones work repayment of that debt into their budgets. They don’t just borrow more and more, passing the debt to future generations.
But the pay-as-you-go measure the president is endorsing has built-in loopholes that experts say would exempt trillions of dollars of increased federal spending over the next decade.
Additionally, members of Congress this week complained about the president’s pay-as-you-go proposals. And House appropriators put forth a preliminary budget for next year that substantially raises spending while skirting pay-as-you-go provisions.
Some economists worry the deficits already on the books, and the growing federal debt, will drive inflation to levels not seen since the 1970s and hamper economic recovery. Establishing some real fiscal restraint could help in that regard.
But, until the president demonstrates his commitment to fiscal restraint is more than just rhetoric, he’ll have trouble enlisting many people in Congress to follow his call for pay-as-you-go.