Pay-go

According to the White House, President Obama signed on Friday a Congressional resolution establishing "statutory Pay-As-You-Go" rules, which will prohibit both chambers of Congress from passing taxation or mandatory spending legislation which adds to the deficit. (Previously, the House had such a rule but the Senate did not.) I had some thoughts about this, but put off writing them until Michael Kinsley summed them up pretty well on The Atlantic Wire last week.

"As a matter of logic, there is no reason a 'pay-go' rule should work," Kinsley wrote. "These and other budget gimmicks are like trying to lose weight by locking the refrigerator and putting the key on a very high shelf where only you can find it. But you know what? Sometimes, that works."

That's right. Pay-go advocates like to point to the fact that deficits ballooned after pay-go was repealed in 2002 -- but don't those deficits have more to do with the priorities of that Congress than the absence of a pay-go rule? It's like saying that gym membership, rather than exercise, causes weight loss.

So what's wrong with adding a procedural hurdle to bills that would increase the deficit?

Maybe nothing. But for the type of legislation that we typically cover -- things like fixing quirks in the federal retirement system -- pay-go rules can become an obstacle. The cost of those programs is normally a drop in the bucket compared to the national debt. But under pay-go, it's still a drop and it has to be paired with something that will take a drop out of the bucket if it's going to pass. Given how many other hurdles exist in the complex legislative processes of both chambers of Congress, this can sometimes be pretty difficult. It was a factor in why the FERS sick leave fix and Hawaii/Alaska locality pay legislation was so hard to pass last year.

And it can also lead to ridiculous legislative tricks, such as when the bill establishing Roth accounts for the TSP became a "windfall" for the government, leading legislators to tack on all of their favorite projects to it. (You can read more about Roth accounts here.) Of course, Roth accounts don't actually increase government revenues at all -- all they do is take a current tax exemption and move it several decades into the future. But because the Congressional Budget Office normally only estimates the 10-year cost of legislation, it became free money as far as Congress was concerned.

There's also the befuddling and arbitrary distinction between "direct spending" and "indirect spending."

I'm not trying to say that pay-go is a bad idea -- I'm just saying this is one aspect of it which rarely gets notice.