The 'Pay-Go' Test

Senate Democrats get the chance to practice the fiscal discipline they've been preaching.

DEMOCRATS IN control of the Senate face a critical first test this week of their professions of fealty to fiscal discipline. Senators are to vote on the fiscal 2008 budget resolution, which sets the parameters for spending and taxes for coming years and, as important, for how budgets will be voted on. Specifically, when lawmakers want to lower certain taxes or increase programs, will they be required to come up with offsetting tax increases or spending cuts?

This issue -- known in shorthand as 'pay-go' -- is central because of pressure to increase spending on farm programs and children's health insurance; to alleviate the impact of the alternative minimum tax; and to extend at least some of the Bush tax cuts beyond their scheduled expiration in 2010. A key question on the floor this week is whether senators wanting budgetary leeway to accomplish these goals will adopt a real pay-go rule, like that contained in the resolution approved by the Senate Budget Committee last week -- or whether they will succumb to the temptation to appear concerned with fiscal discipline while quietly permitting a spending spree. No one should be fooled by a pay-go rule that purports to require offsets but exempts some wish-list item, just as no one should accept one that squeezes spending but not tax cuts.

The Senate debate on the budget resolution will offer ample opportunity for political preening as well as legislative mischief. Democrats will pat themselves on the back for boosting funding for children's health insurance, for instance, but provide few specifics about how the proposed $50 billion expansion would be paid for. It's true that budget resolutions aren't designed to provide such specificity, but it's also true that lawmakers, if they do bind themselves with a true pay-go rule, will have some tough choices to make later.

For their part, Republicans will attack the Democratic proposal as envisioning a huge tax increase, without acknowledging that having the tax cuts expire in 2010 was the deal they agreed to -- and without explaining how, if they want all the tax cuts extended, they plan to avoid digging the deficit deeper. They will also criticize Democrats, with more justification, for failing to take on entitlement spending. President Bush's budget calls for $52 billion in entitlement cuts over five years; the Senate Democrats' budget resolution envisions no net cut (it talks about trimming $15 billion, but that's already devoted to children's health care).

One worthy proposal, contained in the Bush budget, would have imposed higher Medicare prescription premiums for higher-income beneficiaries (individuals making $80,000 annually and couples with incomes above $160,000). Unfortunately, an amendment to that effect was defeated in the budget committee. If Democrats are serious about dealing with health-care entitlement spending, isn't it time for them to demonstrate that? If Republicans are serious about dealing with entitlements, isn't it time for them to put taxes on the table, too?