Publication Date: November 2007
Publisher: Center on Budget and Policy Priorities (Washington, D.C.)
Author(s): Richard Kogan; James Horney
Research Area: Banking and finance
Keywords: Economic projections; Fiscal future; Federal budget; Tax code
In early January, the House of Representatives established a Pay-As-You-Go rule. The rule prohibits the House from considering any tax or entitlement legislation that would increase projected deficits over the coming ten-year period. Proposed entitlement increases must be fully offset, or “paid for,” by reductions in existing entitlements or increases in revenues. Likewise, proposed tax cuts must be fully offset by increases in other taxes or reductions in entitlements. We have examined the actions of the current House and the prior three Congresses with regard to the financing of entitlement and tax legislation and present our findings below. We then discuss the importance of continued adherence to the PAYGO rule as well as some reasons that adherence could collapse.