March 22, 2002
Pay as You Go

Stan Collender of the _National Journal_ is depressed about the state of the congressional budget debate for many reasons. The first--and most remarkable--is the "claim by several members of the House Budget Committee that the budget they reported out last week is actually in balance if the recently enacted stimulus bill is not counted." But these are the same representatives who voted for the stimulus bill. It is just "crazy," writes Collender, "[T]ry to imagine not rolling your eyes as someone told you that the federal budget would be in surplus so long as the Defense Department wasn't counted."

Here are the other reasons: (2) The House Budget Committee's abandonment of ten-year projections. (3) The Budget Committee's shift to the more-optimistic White House budget baseline just because it is more optimistic. (Ah, I remember my days in the Clinton Administration when we used the more pessimistic baseline because we are interested in actually achieving good economic policies rather than just winning rhetorical victories.) (4) Congress's continued inability to raise the ceiling amount on the federal debt--House leaders who would "rather see cash from government pension funds [borrowed without the consent of the fund owners] on a short-term basis than take the political heat for the vote on a debt ceiling increase which they eventually will have to do anyway." (5) Congress finally managed to pass an economic stimulus package only after the consensus of opinion had shifted to confidence that the recession was over and that a stimulus package was no longer necessary. (6) Christopher Cox (R-CA) wants to (a) vote for a reduction in the debt ceiling, but also (b) remove Social Security from the category covered by the debt ceiling limit, so that Congress can claim that it has (c) reduced the maximum allowable national debt while still (d) making it possible for the government to borrow more. (7) Once again Congress is unlikley to be able to pass its budget resolution on time. (8) The head of the Army Corps of Engineers was fired for agreeing with Congress that OMB's proposed budget cuts were unrealistic. And there's more....

There is no doubt that the quality and the degree of responsibility and honesty found in the federal budget debate took a steep nosedive in the last few Clinton years, and that the speed of the nosedive has accelerated since Bush was inaugurated.

I had a brief discussion with the extremely intelligent Rudy Penner of the Urban Institute (head of the Congressional Budget Office during part of the 1980s):

Brad praises how well and honest the budgetary process worked in the early and mid-1990s, and what an important role the Budget Enforcement Act [BEA] and its Pay-As-You-Go restrictions [PAYGO] that made any piece of legislation that increased the deficit out-of-order on the floor of the House and the Senate played in making the 1990s debate both high-quality and effective...

Rudy: ...One substantive point: You rightly praised how the BEA worked from 1990 thru 1997. But then it broke down completely. It may not be renewed or even worse it may be renewed and then ignored. I think now the only defense is presidential vetoes, but I'm not confident he'll use them.

Brad: The discretionary caps were pierced regularly and with gay abandon. But--and correct me if I am wrong--individual bills that moved outside of appropriations jurisdiction still had to be deficit neutral, didn't they? But the rapid dissolution of the effectiveness of the process after 1997 puzzles me greatly...

Rudy: Legislation involving mandatory accounts "had to be deficit neutral", but it wasn't after 98. PAYGO rules were routinely violated, but legally in the sense that a phrase was often included in the legislation that essentially said that this law is not subject to PAYGO rules.

Brad: Yeah. But up through 1997 (or so) inclusion of such a phrase would automatically lose you ten votes (or so) in the Senate. So what happened at the beginning of 1998 to change things so completely? That's still not clear to me...

Rudy: I believe it was the surplus. PAYGO was originally designed to stop tax and entitlement policy from increasing the deficit. (Really, to preserve the gains from the 1990 budget agreement.) After 1997, it had the effect of preventing any reduction of the surplus and that didn't make much sense. Fixing it wasn't easy tho a number of proposals were made. So they decided to ignore it. Now we need it again, but who knows what the Congress will do next...

Posted by DeLong at March 22, 2002 10:01 PM

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