House Approves Pay-As-You-Go Legislation to Rein in Deficit

Press Release

Law Will Require Congressional Action not Increase Deficit;
Similar Law in 1990s Created Record Federal Surpluses

The U.S. House of Representatives today passed legislation to establish mandatory "pay-as-you-go" (a.k.a. "PAYGO") budget discipline to rein in deficit spending and reduce the national debt. H.R. 2920, the Statutory Pay as You Go Act of 2009, would require new measures enacted during each two-year session of Congress that would increase the deficit to be neutralized with other measures that would offset those costs during the same session of Congress. Congressman Gary Peters cosponsored the PAYGO bill.

"Establishing a pay-as-you-go law is critical to restoring fiscal responsibility and balanced budgets to Washington," said Rep. Peters. "We need targeted, responsible investments to get our economy back on track, but Congress must be required to determine how it will pay for new proposals. Pay-as-you-go legislation will ensure Congress searches out and cuts waste throughout the budget and makes the tough choices necessary to get unacceptably high budget deficits under control."

The bill approved today requires Congress to offset the cost of increases in most mandatory spending or tax cuts with savings elsewhere in the budget to avoid increasing the national budget deficit. If the net effect of legislation enacted during a session of Congress increases the deficit, there would be an across-the-board reduction in certain mandatory programs. If necessary, Congress could vote to designate a spending or tax rebate proposal as an emergency measure to exempt the legislation from PAYGO rules in order to respond in extreme circumstances such as war, economic crises or other emergencies.

After PAYGO was originally codified in 1990, total federal spending as a percentage of GDP decreased each year from 1991 through 2000. After Congress let PAYGO expire in 2002, projected surpluses of $5.6 trillion were transformed into projected deficits of $4.5 trillion. Upon taking control of the House in 2007, Democrats reinstated PAYGO as a rule of the House, but the rule did not carry the weight of statute and could be waved without enforceable consequences.

"In the 1990s, pay-as-you-go budget discipline was enshrined in law and it led to record budget surpluses. In the early part of this decade, the PAYGO law was scrapped, creating record deficits," said Rep. Peters. "Families make tough budget choices to live within their means, and the government should be forced to do the same thing."

H.R. 2920 now heads to the Senate.

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