House Adopts Pay-as-You-Go Rules

By Lori Montgomery
Washington Post Staff Writer
Saturday, January 6, 2007

On its second day under Democratic management, the House yesterday overwhelmingly approved new rules aimed at reining in deficit spending and shedding more light on the murky world of special-interest projects known as earmarks.

Under the new provisions, the House will for the first time in years be required to pay for any proposal to cut taxes or increase spending on the most expensive federal programs by raising taxes or cutting spending elsewhere. And lawmakers will be required to disclose the sponsors of earmarks, which are attached in virtual secrecy to legislation to direct money to favored interests or home-district projects.

In recent months, with revelations that lawmakers had earmarked funds for projects with little public benefit, earmarks had became a political embarrassment and a symbol of fiscal profligacy.

The House voted 280 to 152 to approve the rules, which drew the support of 48 Republicans. Democratic leaders, in control of the House for the first time in 12 years, hailed the vote as a sign of their commitment to restore accountability to federal spending and to reduce a budget deficit and national debt that they say have been swollen by Republican tax cuts and military spending.

But even as they celebrated one of their first exercises of legislative power, key Democrats acknowledged that it will be difficult to abide by the new pay-as-you-go spending rules -- known on Capitol Hill as "pay-go" measures -- while keeping their promises to fund health-care, education and homeland-security initiatives. The rule change also jeopardizes President Bush's efforts to extend his tax cuts, most of which will expire in 2010. And it will complicate Democratic efforts to repeal the alternative minimum tax, a set of provisions in the tax code that could force millions of households to pay more this year.

"It's important that they passed a pay-go rule because they're setting a standard for themselves. This is a way of saying 'There's a new sheriff in town' and 'We're going to be fiscally responsible,' " said Robert L. Bixby, executive director of the Concord Coalition, an advocacy group dedicated to deficit reduction. "But, now, they're going to have to figure out how to live up to that standard. And that's going to be pretty tough."

Yesterday's vote completed work on a series of rule changes proposed by Democrats to regulate operations in the House during the 110th Congress. On Thursday, the House adopted stringent new controls on the lobbying of House members, banning gifts from lobbyists and severely restricting privately funded travel. Yesterday, in addition to the rules affecting spending, the House adopted "civility" measures that grant Republican lawmakers more opportunities to offer their views and to participate in legislative debate than Democrats say they received under Republican control.

But the rules on spending drew the most animated debate, as Democrats accused the president and congressional Republicans of frittering away the large budget surpluses they inherited after the 2000 elections and of running up record budget deficits. Last year, the deficit was a relatively modest $248 billion, but the national debt is approaching $9 trillion.

"The one thing we can say about George Bush and his economic policy is: 'We are forever in your debt,' " Rep. Rahm Emanuel (D-Ill.) told his colleagues on the House floor. "On day number two, Democrats have said, 'Enough is enough with running up the debt of this country. We're going to put our fiscal house in order.' "

Republicans fired back, criticizing the new spending rules as a weakened, "paper-tiger" version of an expired pay-as-you-go law, which triggered across-the-board spending cuts whenever legislation increasing the deficit was passed. House leaders have promised to pursue such legislation in the coming weeks, but they note that it could not take effect without the support of the Senate and the White House. In the meantime, House Democrats say, the more limited rule, which makes budget-busting legislation subject to a parliamentary rule of order, is the best they can do.

Budget experts note that House rules are easily waived, and some predict that Democrats will be forced to abandon the new rules, at least for certain expenditures, to meet their campaign promises. For example, House Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.) and other Democratic leaders have vowed to halt the expansion of the alternative minimum tax, which would cost about $50 billion this year alone. Repealing the tax, as Rangel and others advocate, would cost close to $1 trillion over the next decade.

Coming up with that kind of cash is possible, budget experts say, but doing so is probably going to be politically unpalatable. For example, Leonard E. Burman, co-director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, is working on options for covering the cost of a repeal. Among them: Allowing the president's tax cuts to expire and eliminating the federal deduction for state and local income taxes.

That combination would raise more than enough money to pay for repeal, Burman said, but "for somebody like Rangel in a high-tax city and high-tax state, it's going to be hard to swallow. There's no free lunch."

Democrats are already having trouble reconciling their pledge to reduce the deficit with policy changes that they promised to pursue during the first 100 hours of the new Congress. This week, for instance, senior House Democratic aides said the promise to cut in half interest rates on student loans will have to be phased in over five years instead of being passed immediately.

So far, fiscal restraint appears to be gaining the upper hand. As he left the House chamber yesterday, Rangel said he is scouring the tax code for tax breaks that benefit special interests. If the beneficiaries "don't put their hands up, it's out," he said, suggesting that the money saved could go toward paying for the repeal of the alternative minimum tax.

"It's not good for me to have pay-go, but it's good for the country," Rangel said. "At this point, nobody . . . has convinced me that there should be exemptions from pay-go."

© 2007 The Washington Post Company