'Pay As You Go' Bill: Offsetting Federal Spending

Since the financial crisis began, Washington has spent billions of dollars of taxpayers' money to help get the economy going again. That spending has increased the federal debt. President Obama supports legislation that would require any new spending or tax cuts to be balanced by an equal amount in new savings or tax hikes.

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STEVE INSKEEP, host:

This is the week when President Obama tried to reclaim the issue of fiscal responsibility. He inherited a record budget deficit and he's pressing for even more spending on everything from construction to health care. This week, though, the president said he supported legislation to restrain spending in Congress.

The proposed rule is called pay-as-you-go. It says if you come up with a dollar of new spending or a tax cut, you have to balance that with a dollar of new savings, or a tax hike. That way the deficit doesn't get even worse.

NPR news analyst Juan Williams is with us this morning.

Juan, good morning.

JUAN WILLIAMS: Good morning, Steve.

INSKEEP: What prompts the White House to bring this up now?

WILLIAMS: Well, there's tremendous concern in the American public about how President Obama is handling the deficit and specific deficit spending. Right now you have about 40 percent of the American people saying in polls that they have tremendous concern about how Obama's handling the deficit and the economy. That's the worst rating he has on any subject, Steve. And so it's becoming a political liability as the president heads towards those midterm elections for the Congress in 2010.

INSKEEP: Well, is this an issue that could move an election?

WILLIAMS: It is an issue right now that could move an election, because the Republicans see it as a weakness. Newt Gingrich, the former speaker of the House, talking to a group of Republicans earlier this week said President Obama's economic policies have already failed and cited the deficit as evidence.

INSKEEP: I'm glad you mentioned Newt Gingrich, the former speaker of the House, because spending actually was restrained when he was speaker and when President Clinton was in the White House. They had that rule then called pay-as-you-go. And what happened when Democrats, and for a while Republicans, followed it?

WILLIAMS: Well, when - what you had were the surplus years under Bill Clinton. And obviously you had at that point estimates that the U.S. government would be going forward with $800 billion surpluses for some time, for years to come. And everyone thought that was a shoo-in, Steve.

And now what you're looking at is this year a $1.8 trillion deficit and estimates of deficits annually more than $1.2 trillion for the years '09 through '12. So what we see is just red ink for as far as the horizon can hold.

INSKEEP: And we should be fair. There are plenty of reasons that the government got to surplus situations in the late 1990s. And this pay-as-you-go rule was at most one of the factors. But it's a rule that Republicans decided they didn't like, they abandoned early in this decade. And why are they concerned about it? Why do some Republicans criticize the idea now?

WILLIAMS: Well, the idea is that you should own up to any expense that you have created. Now, the reason that the deficit is so large, Steve, is complex. I mean, obviously you have in there things like the Bush tax cuts during his term as well as increased costs for spending on Medicare, prescription drugs, for example. Then, of course, you have the business cycles. This has been a recessionary time, so you have less tax revenue. And then, of course, you have the war.

All of these things cost money. And without pay-as-you-go there to require that you either raise taxes or cut spending to compensate for those increased taxes, that's what's driven the deficit.

INSKEEP: Oh, so you would oppose a rule like this if you wanted to, say, cut taxes a lot and you weren't entirely sure how to pay for it?

WILLIAMS: That's right.

INSKEEP: Let me ask, though, Juan, is there any realistic way for the government to get back anywhere close to a balanced budget given how huge the deficits are right now?

WILLIAMS: No. You know, the fact is that the only way that the government could make this up is if you - in a way, if you had inflation and then you said it was worth less. But no, it's a stump, Steve, and no one's quite sure, especially at the White House, how to deal with it to prevent it from becoming more political.

INSKEEP: Juan, thanks very much.

WILLIAMS: You're welcome, Steve.

INSKEEP Analysis this morning from NPR's Juan Williams, talking about the federal budget deficit and efforts to restrain it.

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