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Jan 13

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Congress’ PAYGO was anything but

Pay-as-you-go, or “PAYGO” rules require that new entitlement spending and new tax cuts must be paid for dollar-for-dollar with entitlement spending cuts or tax increases. On February 4, 2010, pushing for passage of the pay-as-you-go (PAYGO) legislation, then House Speaker Nancy Pelosi stated on the House floor,

When I became Speaker of the House, the very first day we passed legislation that made PAYGO the rule of the House. Today we will make it the law of the land. … So the time is long overdue for this to be taken for granted. The federal government will pay as it goes.  That we will be on a path of deficit reduction and that every action that we take and any bill that we take will have to meet the test: Does this reduce the deficit?  … 

Central to all of that and a very strong pillar of fiscal responsibility is this PAYGO legislation that we have here today.  I couldn’t be more thrilled for what this means about the fundamentals of how we govern, how we choose, and how we honor our responsibility to future generations to reduce the deficit.

The PAYGO legislation was enacted into law on February 12, 2010 (H.R. 4213, the American Jobs and Closing Tax Loopholes Act of 2010).   The new PAYGO law was part of a larger bill that raised the debt limit by $1.9 trillion.  The nonpartisan Congressional Budget Office reported that the net budgetary effects of the bill over the 11-year period 2010-2020 were

  1. $40 billion net tax increase
  2. $174 billion spending increase
  3. $134 billion deficit increase

Similarly, in her November 2010 opinion piece for USA Today, Nancy Pelosi provided a long list of accomplishments since assuming control of the House and Senate in January 2007.  She also discussed PAYGO as follows:  

And we did all of this [the accomplishments]while restoring fiscal discipline to the Congress by making the pay-as-you-go rules the law of the land.”

Similarly, reflecting on the 111th Congress at her last press conference on January 4, 2011, former House Speaker Nancy Pelosi stated this again:

Deficit reduction has been a high priority for us. It is our mantra – pay as you go.”

The reality about PAYGO is different.  On January 4, 2007 (the start of this particular Congressional session), the national debt stood at $8,670,596,242,973.04.  The last day of the 111th Congress on December 22, 2010, the national debt was $13,858,529,371,601.09  – a roughly $5.2 trillion increase in four years.  The year over year federal deficit increased over 7 times during these four years from $162 billion in fiscal year 2007 to approximately $1.3 trillion at the end of fiscal year 2010.  This $1.3 trillion is 8.9 percent of GDP – the second highest since 1945.

The following table lists instances in which Congress waived or ignored its PAYGO rule during the 110th Congress. Overall, Congress passed legislation exempting from PAYGO over $420 billion in non-offset deficit increases.

Table: Non Offset Deficit Increases During 110th Congress

Legislation Date Passed  Non-Offset Amount 
Auto Bailout (H.R. 7321) 12/10/2008 $3.9 billion
Unemployment Insurance Extension (H.R. 6867) 10/3/2008 $5.7 billion 
Emergency Economic Stabilization Act (H.R. 1424) 10/3/2008 $110.4 billion
Economic Stimulus II (H.R. 7110) 9/26/2008 $23.9 billion 
Disaster Tax Relief Act (H.R. 7006) 9/24/2008 $8.1 billion 
2008 Alternative Minimum Tax Patch (H.R. 7005) 9/24/2008 $64.6 billion 
Housing and Economic Recovery Act (H.R. 3221) 7/23/2008 $24.9 billion 
Senate Restaurant Employees (S. 2967) 7/10/2008 $3 million 
War Supplemental (H.R. 2642)  6/19/2008 $70.9 billion 
Unemployment Insurance Extension (H.R. 5749)   6/12/08  $10.0 billion 
Farm Bill (H.R. 2419) 5/14/2008 $2.9 billion
Economic Stimulus I (H.R. 5140)   2/7/08  $124.4 billion 
2007 Alternative Minimum Tax Patch (H.R. 3996)  12/19/2007 $50.6 billion 
State Children’s Health Insurance Program (H.R. 3963) 10/25/2000 $3.1 billion 
2007 War Supplemental (H.R. 2206) 5/24/2007 $6.0 billion 

Because of this spending and deficits, nonpartisan experts have warned about the creditworthiness of the United States government almost a full year ago.

About the author

Nicole Liska

I am a Principal at Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I hold an ABD and MA in economics from the University of California, San Diego. I perform damages analyses and serve as a damages expert witness. My resume is on Fulcrum's website.

Permanent link to this article: http://betweenthenumbers.net/2011/01/nancy-pelosi%e2%80%99s-persistent-and-departing-words-are-perplexing/

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