PAYGO Rules for Budget Enforcement in the House and Senate

Publication Date: May 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Government

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Abstract:

One of the most contentious issues in budget procedure in recent years has involved proposed changes in the Senate's "pay-as-you-go" (PAYGO) rule and efforts to establish a similar rule in the House. This controversy led to an impasse between the House and Senate over the FY2005 budget resolution and surfaced again during consideration of the FY2006 budget resolution. The issue focuses principally on whether tax-cut legislation, even though it may worsen the deficit, should be exempted from a deficit-neutral PAYGO requirement.

The Senate's PAYGO rule currently prohibits the consideration of revenue or direct spending legislation that would cause (or increase) an on-budget deficit for any one of three applicable time periods: (1) the first fiscal year covered by the budget resolution; (2) the first five fiscal years covered by the budget resolution; and (3) the next five fiscal years after that. Revenue reductions, direct spending increases, or a combination of the two are allowed only so long as they are completely offset by revenue increases, direct spending reductions, or both. The rule does not apply, however, to revenue reductions or direct spending increases assumed in the budget resolution. A point of order raised under the rule may be waived by an affirmative vote of 60 Senators. The rule is scheduled to expire at the end of FY2008.

Neither the Senate's PAYGO rule, nor proposals for such a rule in the House, address increases or decreases in revenues or direct spending that are reflected in the calculations of the budget baseline; the rule applies only to the effects of legislation that is pending. Therefore, revenue decreases or spending increases that stem from existing law are not constrained by the rule.

Following the establishment of the PAYGO rule in 1993, the Senate has modified the rule several times for different reasons, including establishing and extending an expiration date, expanding the rule's application to curtail potential evasion, allowing on-budget surpluses to be "used" to cover revenue reductions and direct spending increases, and providing for exemptions to the rule. Proposals to modify the Senate's PAYGO rule or to establish a PAYGO rule in the House raise several issues, including the appropriate coverage of the rule and the provision for exemptions, and the period for which the rule should be in effect, among others.

In 2005, during consideration of the FY2006 budget resolution, S.Con.Res. 18, the Senate addressed the issue. It rejected a proposed modification to its PAYGO rule (in the form of amendment 186, offered by Senator Russell Feingold) on a 50-50 tie vote. In addition, the House rejected a proposal to establish a PAYGO rule of its own (in the form of an amendment offered by Representative John Spratt) during consideration of the budget resolution, H.Con.Res. 95. Both proposals would have subjected revenue and direct spending legislation to PAYGO requirements, but without exempting any initiatives assumed in the budget resolution, effective through September 30, 2010 (Feingold) or December 31, 2015 (Spratt).

This report will be updated as developments warrant.