House Budget Committee Pay-As-You-Go Proposal Would Exempt All Tax Cuts and Make a Mockery of Efforts to Restore Fiscal Discipline

Publication Date: June 2004

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Robert Greenstein; Joel Friedman

Research Area: Banking and finance

Keywords: Federal budget; National debt; Fiscal future; Economic projections

Type: Report

Abstract:

House Budget Committee approved on March 17 legislation introduced by the Committee’s Chairman, Rep. Jim Nussle, that would resurrect the “pay-as-you-go” rules, but in a way that undermines their original intent and is likely to fail to achieve meaningful fiscal discipline.

The pay-as-you-go rules that were a centerpiece of the bipartisan 1990 Budget Enforcement Act — and proved highly effective in enforcing fiscal restraint in the 1990s — required the costs of both entitlement expansions and tax cuts to be offset fully. These rules guarded equally against deficit-increasing actions on both sides of the budget ledger. In contrast, the Nussle proposal adopted by the House Budget Committee would apply the pay-as-you-go rules to entitlement programs only. It would impose no constraints whatsoever on new tax cuts. They would be entirely exempt from the pay-as-you-go discipline.

This unbalanced approach, also proposed by the Bush Administration, is likely to be ineffective in preventing the further growth of deficits.