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Thursday, March 28, 2024 | Back issues
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House Passes ‘Pay as You Go’ Law

WASHINGTON (CN) - The House passed "pay as you go" legislation Wednesday, which President Obama has said would allow Congress to "spend a dollar if it saves a dollar elsewhere," to stem the use of debt in financing entitlement programs and tax cuts. "It is time to stop the practice of passing today's costs onto future generations," Obama said after the vote.

In June Obama asked Congress for "pay as you go" legislation.

"Paying for what you spend is basic common sense," the president said. "Perhaps that's why, here in Washington, it's been so elusive."

After the Wednesday vote in the House, Obama took a more optimistic view. "With this vote, the House of Representatives demonstrated strong support for fiscal discipline," he said.

PAYGO would not eliminate the deficit, but could help rein in its growth. The act would apply only to new laws, so growing demands by aging baby boomers on entitlements that are already written into the law, such as Social Security and Medicare, would not need to be countered by tax increases or other measures. Nonetheless, new programs would have to be accounted for.

In a telephone interview, Alan Viard from the American Enterprise Institute, a conservative think tank, called it a "modest step," but said he supported it.

"If you're in a hole, you need to stop digging," he said.

Citing health care and permanent middle-class tax cuts, Viard said, "This rule says you would not be able to do those things unless you find offsets."

When asked about the bill's effect on efforts such as the $787 billion stimulus package, Viard replied, "The stimulus would have required some type of waiver."

He added, "It doesn't make sense to pay for a stimulus package," which is designed to inject money into the economy.

Obama used history when making his case for "pay as you go" legislation in June.

"It is no coincidence that this rule was in place when we moved from record deficits to record surpluses in the 1990s," he said, "and that when this rule was abandoned, we returned to record deficits that doubled the national debt."

Similar rules have been adopted in the past, sometimes through legislation, and sometimes as internal rules of the Senate or the House.

One such "pay as you go" rule was in effect from 1990 until 2002, although toward the end it was consistently waived by Congress.

"The reckless fiscal policies of the past have left us in a very deep hole," Obama said.

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