By Lori Montgomery
Washington Post Staff Writer
Friday, February 5, 2010; A02
Congress agreed Thursday to revive the pay-as-you-go budget rules that helped wipe out massive deficits and balance the budget during the Clinton administration, although the new version includes a long list of exceptions that would permit Democrats to add at least $1.5 trillion to the nation's tab over the next decade.
The House voted 233 to 187 to approve the rules, known in congressional shorthand as paygo. The rules were adopted last month by the Senate and now go to President Obama for his signature.
The return to paygo comes as record deficits push the government more deeply into debt than at any time since the 1950s. Democrats attached the new rules to a must-pass measure that raises the legal limit on government borrowing by a record $1.9 trillion. With the public debt expected to hit the current cap by next week, the increase -- which was approved on a separate vote, 217 to 212 -- authorizes the Treasury Department to continue borrowing to cover the nation's bills through early next year.
Republicans voted unanimously to block the increase, inviting the first default by the U.S. government. They accused Democrats of wasting billions of dollars on an economic stimulus package that failed to prevent millions of people from losing their jobs and said the reinstatement of pay-as-you-go rules would do little to reverse the damage. The White House projects that this year's deficit will hit a record $1.56 trillion.
"It would be recklessly naive to go about our business in Washington pretending there won't be severe consequences for the mountain of debt we're piling up," said Rep. Eric Cantor (R-Va.), the number two House Republican. "We've heard a lot about the majority's paygo scheme. But this will not affect any spending that has already happened."
Democrats countered that the budget was balanced when President Bill Clinton left office and that Republican policies -- primarily big tax cuts and the Iraq war -- are responsible for the bulk of the debt the country has accumulated in recent years. Meanwhile, the worst recession since the Great Depression was pushing deficits into record territory before Obama took office.
The budget that Obama laid out this week would add $8.5 trillion to the debt by 2020, some of it explicitly permitted under the new paygo rules. For example, the rules allow Obama to extend tax breaks for the middle class enacted during the George W. Bush administration without covering the cost. Over the next decade, that extension would add $1.3 trillion to the debt by Democratic estimates or as much as $1.9 trillion according to Republicans.
The rules also permit lawmakers to protect taxpayers from the expansion of the alternative minimum tax for two years, lower the estate tax for two years and protect doctors who serve Medicare patients from a scheduled pay cut through 2014.
Democrats say those are current policies that could not easily be overturned and would be almost impossible to pay for. The new paygo rule, they said, will prevent additional tax cuts or new government benefit programs from being adopted unless Congress summons the will to cover the cost.
"This bill is not perfect. But the perfect is always the enemy of the good in a legislative body," said Rep. John Tanner (D-Tenn.), a longtime paygo advocate who is retiring this year. "I cannot think of a single good financial reason not to say, well, let's just do this, if it's all we can do."
Obama praised the legislation's passage. "PAYGO would hold us to a simple but bedrock principle: Congress can only spend a dollar if it saves a dollar elsewhere," he said in a statement. "Mandatory spending increases and tax cuts must be paid for; they're not free, and borrowing to finance them is not a sustainable long-term policy."
The revival of paygo is part of a three-step strategy for tackling the nation's budget problems. Obama has also pledged to freeze non-security spending for three years and to create a bipartisan commission to come up with a plan for reducing projected budget deficits.
Obama promised to appoint the commission during last week's State of the Union address. On Thursday, White House officials made contact with Senate Minority Leader Mitch McConnell (R-Ky.) and House Minority Leader John A. Boehner (R-Ohio), Republican aides said; a meeting to discuss the commission is set for next week.
House Majority Leader Steny H. Hoyer (D-Md.), a leader in the effort, said Thursday that Obama plans to proceed with or without their cooperation. "The president and we are very hopeful that Leader Boehner and Leader McConnell will appoint people to participate in the deliberations," he said in a conference call with reporters. "But the president will not be precluded from moving forward just because Leader Boehner and Leader McConnell choose not to participate."