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Would PAYGO Really Limit Spending?

4793278As a budget policy, PAYGO sounds more like a public toilet that requires two quarters to enter.

Actually, it's short for pay-as-you-go, a policy which, if enacted by Congress as President Obama today implored, would set what he calls a "simple" standard.

"Congress can only spend a dollar if it saves a dollar elsewhere," he explained.

With his first two federal budgets projecting the largest deficits in U.S. history, each above a trillion dollars, Mr. Obama wants to be seen speaking the gospel of fiscal discipline and distancing himself from the free-spending ways of Congress, of which he was a member for four years.

"Paying for what you spend is basic common sense. Perhaps that's why, here in Washington, it's been so elusive," he needled an audience in the East Room this afternoon that included some House members.

But briefing reporters, White House Budget Director Peter Orszag conceded some of PAYGO's limitations. It doesn't cover discretionary spending.

"PAYGO only applies to the mandatory side of the budget and to revenue," said Orszag. That means entitlement programs such as Medicare and revenue programs like taxes. It'll cover the compulsory health care plan the president wants Congress to pass – but over five or 10 years. In a single year, the plan may exceed PAYGO limits.

In addition, about 40 percent of the federal budget, programs for education, energy, the military, etc., would not be covered by PAYGO, said Orszag. A different set of Senate and House rules apply to those programs, he said.

As for existing deficits and the National Debt, which today stands at an all-time high of $11.39 trillion, PAYGO has no effect, other than to slow its growth by restraining some government spending. Orszag says the government is already in a deep economic hole and PAYGO is intended to stop further digging.

Mark Knoller is a CBS News White House correspondent. You can read more of his posts in Hotsheet here. You can also follow him on Twitter here:
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