Pay-as-you-Go

[dilettante]

This was kind of surprising to see in the news just now. I'm not sure how feel about the concept, but I'm shocked (and mildly amused) to see this kind of proposal coming out of this administration at this time.

Obama proposes making 'pay-as-you-go' the law
WASHINGTON (CNN)

-- President Obama on Tuesday proposed making "pay-as-you-go" rules for federal spending into law.

The so-called PAYGO proposal requires Congress to balance any increased spending by equal savings elsewhere, Obama said in announcing the measure that now goes to Congress.

A previous PAYGO mandate helped erase federal budget deficits in the 1990s, and subsequent ineffective rules contributed to the current budget deficits, Obama said. Now the PAYGO rules should be the law, he said.
"Paying for what you spend is basic common sense," Obama said. "Perhaps that's why, here in Washington, it's been so elusive."

Republican leaders said the proposal comes after record spending initiatives by the Obama (http://topics.cnn.com/topics/Barack_Obama) administration, such as the $787 billion economic stimulus program.

"It seems a tad disingenuous for the president and Speaker [Nancy] Pelosi to talk about PAYGO rules after ramming trillions in spending (http://topics.cnn.com/topics/Government_Spending) through Congress proposing policies that create more debt in the first six months of this year than in the previous 220 years combined," said Rep. Eric Cantor of Virginia, the House Minority Whip.

However, a group of fiscally conservative Democratic representatives known as the Blue Dogs called Obama's proposal responsible and necessary.

"President Obama inherited an economy in free-fall and a $10.6 trillion national debt," said Rep. Jim Cooper of Tennessee, vice-chairman of the Blue Dog Budget and Financial Services Task Force.

"While short-term spending was necessary to get the economy moving again, our long-term fiscal problems became that much more urgent."
A White House statement said Obama's proposal calls for the Office of Management and Budget to maintain a ledger of the average 10-year budgetary effects of all legislation affecting mandatory spending or baseline tax levels.

Any extra cost that lacks payment authorized by Congress would require the president to find money within the budget to pay it, while any tax cut would require a corresponding increase in tax revenue.

Some costs would be exempt, including Medicare payments to doctors, the estate and gift tax, and tax cuts enacted in 2001 and 2002, the White House statement said.

http://www.cnn.com/2009/POLITICS/06/09/obama.paygo/There are really two questions inherrent here. (1) Is a Federal pay-as-you-go plan a good idea? and (2) Is there any chance Obama is actually serious about this, and if so how would it effect his stated objectives?

[drgoodtrips]

Well, after spending a trillion dollars, it kind of makes sense. It would be the equivalent of me charging new furniture and state of the art electronics to my credit card to stimulate household enjoyment, and then lecturing my family (assuming I had one of which I was breadwinner) about the importance of spending no more than we earn.

A good time for it, to be sure... :lol:

[drgoodtrips]

If it happens, I certainly like the idea. It could be a good way (if such a thing as possible) to reduce US spending on military adventuring technology from "absolutely mind-blowing" to a mere "completely outrageous."

[The Drunk Guy]

If it happens, I certainly like the idea. It could be a good way (if such a thing as possible) to reduce US spending on military adventuring technology from "absolutely mind-blowing" to a mere "completely outrageous."
I would settle for "mind-bogglingly audacious."

[Michael]

There are really two questions inherrent here. (1) Is a Federal pay-as-you-go plan a good idea?
On the whole, it's not a bad idea. Anything that can encourage Congress to show any kind of rational responsiblity for their own actions is a good thing.

That has indeed been one of the most salient themes in Washington for the last decade - the way Congress seems divorced from reality - like playing budget games in order to pretend that the Iraq War didn't cost anything so that one could continue to claim that massive tax cuts wouldn't cause a deficit problem. :ummm:

And speaking of which, so long as the Republican party and most of the Washington establishment media is convinced that 'supply-side' economics works, despite mountains of evidence to the contrary, I'm afraid that you will hear bizarre arguments about how some new tax cut won't need any 'offsets' because it will pay for itself - being cited under "pay as you go" rules.

(2) Is there any chance Obama is actually serious about this, and if so how would it effect his stated objectives?
I can see where this is coming from - the Democratic party 'Blue Dogs' are not happy these days at all and they are making lots of noise. If they are not thrown a 'bone' by Obama (big bone, real soon), they could derail the Healthcare debate.

As such, I'd bet money that this is part of some deal Obama has made with the 'Blue Dogs' to keep them inside the party-line.

Will Obama be able to deliver? Who knows. Will it cause Obama trouble down the road with his progressive agenda? Propably yes.

However, if Obama is half as smart as people say he is, then Obama knows he's going to have lots of trouble with the 'Blue Dogs' playing grandstanding games down the road no matter what so buying off trouble now is just plain necessary.

[dilettante]

I can see where this is coming from - the Democratic party 'Blue Dogs' are not happy these days at all and they are making lots of noise. If they are not thrown a 'bone' by Obama (big bone, real soon), they could derail the Healthcare debate.

As such, I'd bet money that this is part of some deal Obama has made with the 'Blue Dogs' to keep them inside the party-line.

Will Obama be able to deliver? Who knows. Will it cause Obama trouble down the road with his progressive agenda? Propably yes.

However, if Obama is half as smart as people say he is, then Obama knows he's going to have lots of trouble with the 'Blue Dogs' playing grandstanding games down the road no matter what so buying off trouble now is just plain necessary.

Actually it was health-care that I thought would be most problematic here, since the big question regarding Obama's health-care plans is "Where is the money going to come from?" I could see Pay-as-you-Go potentially stopping that initiative in it's tracks.

[Michael]

Actually it was health-care that I thought would be most problematic here, since the big question regarding Obama's health-care plans is "Where is the money going to come from?" I could see Pay-as-you-Go potentially stopping that initiative in it's tracks.
Yes, you are precisely correct.

But the alternative is that the 'Blue Dogs' were threatening to sell out on Healthcare "now" and kill the public option side and cave into the Healthcare lobby and go for a 'stripped down' approach of 'reform' to the healthcare field, but no new Government program. Obama is, as they say, stuck between a rock and a hard place here. He's apparently taking the lesser of two evils.

[dilettante]

Good lord. Check this out: http://www.google.com/hostednews/ap/article/ALeqM5j8db-x8aZtGaU-FOMlbG5cSsIRWQD98NETP00

Obama: It's OK to borrow to pay for health care

WASHINGTON (AP) — President Barack Obama on Tuesday proposed budget rules that would allow Congress to borrow tens of billions of dollars and put the nation deeper in debt to jump-start the administration's emerging health care overhaul. The "pay-as-you-go" budget formula plan is significantly weaker than a proposal Obama issued with little fanfare last month.

It would carve out about $2.5 trillion worth of exemptions for Obama's priorities over the next decade. His health care reform plan also would get a green light to run big deficits in its early years. But over a decade, Congress would have to come up with money to cover those early year deficits....


Clearly Obama is shooting for the "Pay-as-YOU-go, not pay-as-I-go" plan...

[Evangeline]

Well, after spending a trillion dollars, it kind of makes sense. It would be the equivalent of me charging new furniture and state of the art electronics to my credit card to stimulate household enjoyment, and then lecturing my family (assuming I had one of which I was breadwinner) about the importance of spending no more than we earn.

A good time for it, to be sure... :lol:

A more fitting analogy would be if your company was suddenly in big financial trouble because the guy who ran it before you really fucked things up so the only thing you could do to save it was borrow a bunch of money. Then when the loan you took was starting to make your business function again, you decided to spend only what you make going forward, since it worked really well for the guy who ran the company 9 years ago. He even had a surplus~!

[Evangeline]

Good lord. Check this out: http://www.google.com/hostednews/ap/article/ALeqM5j8db-x8aZtGaU-FOMlbG5cSsIRWQD98NETP00



Clearly Obama is shooting for the "Pay-as-YOU-go, not pay-as-I-go" plan...

It's a long term ideal. The more people who have health insurance, the less it costs the rest of us in the future.

Just as education is a long term ideal - the more people who are educated, the less we have to spend on prisons and welfare. Plus, more people with good jobs = more tax revenue.

More healthy people = less expensive hospitalization for people who can't pay for it.

[Evangeline]

Well, after spending a trillion dollars, it kind of makes sense. It would be the equivalent of me charging new furniture and state of the art electronics to my credit card to stimulate household enjoyment, and then lecturing my family (assuming I had one of which I was breadwinner) about the importance of spending no more than we earn.

A good time for it, to be sure... :lol:

When you think about it, your analogy fits the Bush admin. He spent trillions of dollars giving tax cuts to the rich (buying furniture) and two wars (buying electronics) which doesn't do anything to help your financial situation except put you into debt.

And now the Republicans are you, lecturing your family about spending no more than we earn.

[The Drunk Guy]

When you think about it, your analogy fits the Bush admin. He spent trillions of dollars giving tax cuts to the rich (buying furniture) and two wars (buying electronics) which doesn't do anything to help your financial situation except put you into debt.

And now the Republicans are you, lecturing your family about spending no more than we earn.
This sounds like a "I know you are, but what am I?" argument.

[Michael]

And now the Republicans are you, lecturing your family about spending no more than we earn.
The Congressional Republicans have no credibility on this issue at all.

They totally supported Reagan's massive spending increases and huge tax cuts causing (at that time) the largest deficit in American history. They repeated the game under GW Bush in order to break their own record deficit under Reagan.

They also cheered when VP Cheney famously said "Reagan proved that deficits don't matter".

Apparently Republicans LOVE deficits if a Republican is in the White House but instantly flip-flop to consider them destructive if a Democrat is in the White House.

[dilettante]

It's a long term ideal. The more people who have health insurance, the less it costs the rest of us in the future.

Just as education is a long term ideal - the more people who are educated, the less we have to spend on prisons and welfare. Plus, more people with good jobs = more tax revenue.

More healthy people = less expensive hospitalization for people who can't pay for it.

Oh I've no doubt that there's much to be said for long-term measures that, while pricey up front, pay for themselves over the years. However, that mentality does fly directly in the face of the "pay-as-you-go" scheme of financial management.

In other words, you can argue that we need to make long-term investments in the economy to sow the seeds for vital growth down the road, or you can argue that we need to cut spending and balance the budget year-by-year.
What you can't do is argue that we should invest in you're personal long-term projects while forcing everyone else to balance out theirs. Not without looking like a hypocrite, anyway.

[Michael]

Btw, and just for context here regarding the healthcare issue. The present 'tax-subsidy' for private healthcare insurance is roughly $226 billion per year (2008).

This is probably the single most regressive element in the US tax code (where the majority of the benefit goes to the highest income earners) - though it is very similar to the other large tax subsidies (mortgage interest and capital gains) in that it is entirely regressive.

[drgoodtrips]

When you think about it, your analogy fits the Bush admin. He spent trillions of dollars giving tax cuts to the rich (buying furniture) and two wars (buying electronics) which doesn't do anything to help your financial situation except put you into debt.

And now the Republicans are you, lecturing your family about spending no more than we earn.

As far as I can tell, the Republicans stopped even paying lip service to "Pay as you go" once Clinton was out of office. That is, during Bush's years, they never even acknowledged that it might be a good idea. I think you're going to be hard pressed to see an idea like this when the same party controls the executive and legislature. My analogy doesn't fit the Bush administration because Bush never even bothered to couch his exorbitant deficit spending as a bad thing, opting instead to talk about how he didn't plan to "have to" fight two wars and have a bad economy that he inherited.

So, it seems to me that Bush and Obama are doing roughly the same thing in that arena, but with Obama at least acknowledging that indefinite deficit spending is a bad idea. I suppose the latter is marginally better.