Even before Democrats took control of the House Thursday, things had gotten lively. Rep. Ro Khanna (Calif.) and Rep.-elect Alexandria Ocasio-Cortez (N.Y.), the avatars of an increasingly muscular progressivism within the Democratic Party, announced that they would oppose the rules package proposed by incoming House Speaker Nancy Pelosi. The sticking point was “pay as you go,” a.k.a. paygo, a rule that requires new programs to be paid for either by raising taxes or cutting other spending.
Paygo isn’t a new idea; it has been around, off and on, either as a statute or an internal congressional rule, since 1990 — though since Congress can undo any law or rule Congress makes, it has often been honored in the breach.
In a better world, a rule like this would be no more controversial, or necessary, than a rule requiring legislators to breathe at regular intervals. Over the long run, inflow must match outflow, and a prudent government tries to make them match in the short term, too.
In the actual world, the actual U.S. government abandoned prudence decades ago. The most recent federal budget surplus occurred in 2001, and it came courtesy of two historical accidents: a dotcom bubble that sent tax revenues soaring, and a Republican takeover of the House that made it difficult for the Clinton administration to spend the windfall.
The surplus was an aberration. The federal government has been running significant budget deficits for most of the past 50 years, and unless something drastic changes, it’s only going to get worse. Yet Republicans were allergic to fiscal discipline during their just-ended unified control of Congress and the White House, and that binge followed an Obama administration that ran the largest deficits since World War II.
Of course, President Barack Obama was also presiding over the worst economic downturn since the Great Depression, circumstances in which most economists, left and right, agreed that the government ought to be running substantial deficits. But, as the economy recovered, Obama didn’t do enough to reduce the deficit, and his administration gamed the budget-scoring process to pass an expensive new health-care entitlement that will strain federal finances for decades to come.
But without the excuse of an economic crisis, the administrations of Ronald Reagan, George W. Bush and now Donald Trump gifted the nation with giant tax cuts without correspondingly giant spending reductions. Each successive tax cut has been less economically and politically justifiable than the one that preceded it.
Supply-side sympathizers might retort that there’s a difference between deficit-financed tax cuts and deficit spending. And they wouldn’t be entirely wrong, because too-low tax rates are a lot easier to fix than too-high spending.
After all, the remedy for inadequate tax rates is pretty obvious: Raise the rates. That’s not politically easy, but it’s child’s play compared with cutting a major spending program. New spending programs give rise to new interest groups, who stand ready to fight like tigers if you try to cut their government payouts.
But, just as important, government-provided services crowd out the private institutions that had been providing them. If the government takes over the provision of health insurance, for example, then all the underwriting and administrative expertise that insurers have spent decades building will quickly go stale and eventually disappear. Those private institutions cannot spring back overnight if the government exits the sector again. So costly new spending programs effectively leave legislators with the choice of continuing a program forever or throwing voters into the void their predecessors created. Which is no choice at all.
That said, deficit spending on tax cuts still has to be repaid by future taxpayers, with interest. Republicans have been ignoring that fact ever since the Reagan administration pushed through large tax cuts paired with what came to be known as the budgetary “magic asterisk”: spending cuts to be identified later. And modern Republicans are worse: The Tax Cut and Jobs Act of 2017 didn’t even gesture at fiscal responsibility. Their logic was purely and entirely We want this now; let our children and grandchildren figure out where the money will come from.
Progressives on Thursday took the same approach in opposing the paygo plan. If they had to raise taxes to pay for Medicare and a Green New Deal and all the rest of their ambitious spending plans, their agenda would die on the vine. Why should they sacrifice their priorities to fiscal rectitude when Republicans clearly won’t return the favor?
To her credit, Pelosi ignored their pleas and put forward the rules package with paygo intact; it passed with few defections. But she won’t be around forever, and with the progressive wing growing in voice and power, there’s a real chance that she’ll be replaced by a Democratic successor who will eschew the strictures of paygo — or by a Republican who almost definitely will.
Either way, the American taxpayer will be in for a lively time. Though not, I think, a happy one.