Austerity Kills. PAYGO Must Go.
PAYGO, which requires legislation to be funded by either tax increases or spending cuts, is one of the worst legacies of Nancy Pelosi’s speakership. It needs to be abolished, along with the disastrous austerity politics that underpins it.
For Republicans, austerity has long been part of their cynical political gamesmanship. During Barack Obama’s presidency, a stimulus package that was intentionally downsized to minimize criticism from deficit hawks was declared tyrannical and became the supposed raison d’être of the Tea Party movement. But, of course, the Trump administration’s profligate spending created no similar concerns.
We can now expect that at noon on January 20, 2021, Republicans will suddenly rediscover their disdain for deficit spending.
However, we can also expect some conservative Democrats to take up that same mantle — demanding fiscal responsibility and the return of austerity politics. In service to their cause, they will insist on the continued implementation of a rule in the House of Representatives known as PAYGO, which requires legislation to be funded by either tax increases or spending cuts.
During the 2018 midterm election, Nancy Pelosi pledged to restore the PAYGO rule in the House of Representatives, replacing the Republicans’ version called CUTGO that allowed them to pass tax cuts without “pay-fors.” She kept her promise and changed these rules when she assumed the speakership at the beginning of the next Congress. Numerous progressives objected to PAYGO’s inclusion in the rule, and representatives Alexandria Ocasio-Cortez and Ro Khanna voted against the entire rules package as a result.
Pelosi’s office claimed PAYGO was a statutory requirement based on Obama-era provision, and that failing to establish their own rule would allow the Trump White House vast powers to cut the federal budget. One spokesperson told CNN, “There is a PAYGO mechanism within Federal law that requires (the Office of Management and Budget, which is led by Mulvaney) to offset the cost of deficit-increasing legislation by forcing indiscriminate, across-the-board cuts in federal mandatory spending.” Its merits were dubious at the time, but with Joe Biden as president, this rationale will no longer be operative in any sense.
And yet, amid the most significant economic and health crisis in decades, it seems that significant pressure needs to be put on Pelosi’s office to eliminate PAYGO.
This is not simply an esoteric parliamentary debate that has no impact on people’s lives. PAYGO rules, and austerity politics in general, have caused real pain. In a paper entitled “The bad economics of PAYGO,” the Economic Policy Institute noted that, “The recovery from the Great Recession was the slowest in post-World War II history, and the degree of fiscal austerity can entirely explain its slowness.”
This “slowness” meant increased unemployment, increased hunger, decreases in access to health care, and an overall increase in mortality. Yes, austerity politics kill.
What makes PAYGO even worse is that it isn’t even a real constraint on spending, and it doesn’t impose fiscal discipline. Have deficits declined over the past two years since Nancy Pelosi restored the rule?
By design, PAYGO specifically constrains progressive policies, giving leadership in the House of Representatives an excuse for not bringing otherwise popular measures before Congress. If PAYGO rules remain in place, legislation such as spending on green infrastructure would be held up as members debated how to “pay” for them. Yet, at the same time, tax cuts and massive increases in Pentagon spending are never placed under the same constraints.
The entire purpose of the PAYGO rule is purportedly to provide political cover to moderate Democrats in swing districts so they can claim the mantle of fiscal responsibility. While this has always been a silly argument, it is now political malpractice. If a Democratic politician demands PAYGO because they are scared of hypothetical Republicans complaining about budget deficits, they are so incompetent that the Democratic Congressional Campaign Committee (DCCC) should recruit a new candidate to run in their district.
For the Congressional Progressive Caucus, the PAYGO rule should be viewed as a declaration of war against its agenda. A Green New Deal, Medicare for All, tuition-free college, and debt forgiveness would all be made less likely to succeed under this House rule. But it’s not only progressives and leftists who should be concerned.
Joe Biden is entering the White House at a time when a large stimulus package is both an economic and a political necessity. His reelection is contingent on lifting the real economy, and not simply Wall Street, out of the malaise created by the COVID-19 pandemic. The White House will already likely have to contend with a Senate controlled by Mitch McConnell, who will be unlikely to want to provide any legislation that would increase Democratic prospects at the ballot box.
The current Democratic majority in the House of Representatives should be willing to spend as much as possible to grow the economy. With a thin majority, the midterm elections will already put control of the chamber in peril. The irony is that the members who will likely push for the PAYGO rule — moderates from swing districts — are the ones who will be put most at risk by its existence. The worst political strategy Democrats could deploy over the next two years would be to go small when it comes to domestic spending.
This is why the elimination of the PAYGO rule is such an important test for Nancy Pelosi’s speakership. Including it at the beginning of this Congress is a sure sign that the House of Representatives is not ready to tackle the major issues of the day and would rather wrap itself in process issues. It would set an early tone that could bode poorly for the midterm elections in two years.
But more important would be its immediate impact. If the first act of Congress during the prelude to the Biden presidency is to enact one of its guardrail policies, it will immediately signal that a Democratic congress is not ready to improve conditions for working people.