Congress raises debt limit, then votes to curb spending

McClatchy NewspapersFebruary 4, 2010 

WASHINGTON — The House of Representatives voted 233-187 Thursday to approve tough new restrictions on future spending and tax cuts, but the changes are highly unlikely to reduce record federal budget deficits anytime soon.

The vote for a system called "pay as you go" will require that most new programs and tax cuts be offset by tax increases or spending reductions.

The new requirement comes with lots of exemptions, however, and it's telling that it's part of legislation to increase the nation's debt limit by $1.9 trillion, an adjustment that's necessary because budget deficits are expected to reach $1.56 trillion this fiscal year and $1.27 trillion next year.

The government will be able to borrow as much as $14.3 trillion, enough to pay its bills at least through this year. Without the new limit, that authority probably would have been exhausted later this month.

The bill, which the Senate passed last week, now goes to President Barack Obama for his signature.

Democrats hailed the new restrictions as historic.

"Some argue that the pay-go legislation on the floor today is too weak; but I'd point out that it brings our country more fiscal discipline than it has seen in nearly a decade," said House Majority Leader Steny Hoyer, D-Md.

Republicans scoffed.

"Yes, history is being made today. Never in the history of America has the debt been increased to $14.3 trillion," said Rep. Jeb Hensarling, R-Texas.

The pay-as-you-go plan is little more than a "political fraud," said Sen. Judd Gregg, R-N.H., because it contains exemptions for middle-class tax cuts, Medicare payments to doctors, estate tax breaks and other politically sensitive programs.

While the change may be a baby step, "it is meaningful, because it has teeth," Charles Konigsberg, the director of the deficit reduction task force at the Bipartisan Policy Center, an independent research group, said of the plan. If offsets aren't adopted, spending could be subject to automatic, across-the-board cuts.

Similar rules were in effect in the 1990s, and were credited with helping to produce budget surpluses by the end of the decade.

"They had a significant effect. We knew we couldn't do anything unless we paid for it," said Bruce Reed, President Bill Clinton's former chief domestic policy adviser. "It also forced an honest discussion about tradeoffs."

That dialogue, analysts said, may be the chief value of the change, because the White House and Congress now will have to think more carefully before making any ambitious new spending or tax-reduction proposals, said Robert Bixby, the director of the Concord Coalition, a budget watchdog group.

"It's impossible to measure its exact impact," he said, "but it contributed to an atmosphere that fiscal responsibility was the standard."

The 1990s rules were first imposed as part of a 1990 bipartisan budget agreement between President George H.W. Bush and Democratic congressional leaders. They were renewed twice in the decade, both times with bipartisan support.

Other factors also are credited with helping to produce surpluses. Tight limits on most spending were in place, and the robust economy produced revenue that few budget analysts had foreseen.

By 2001, with the budget in its fourth year of surplus and the new George W. Bush administration eager to enact massive tax cuts, the rules were circumvented, and in late 2002 they expired.

After that, two wars, a 2003 tax cut, a new Medicare prescription-drug benefit and then the 2007-09 recession boosted spending without offsetting reductions or tax increases.

In each of the last two fiscal years, the deficit has shattered previous records, and the nonpartisan Congressional Budget Office now estimates that the national debt will reach 60 percent of the gross domestic product this year, its highest level since 1952.

Lawmakers feel a new urgency to act, so the push for new restrictions has gained momentum.

Several other options are being considered. The Senate came within seven votes last week of approving a powerful debt-reduction commission that would have the ability to recommend changes in Social Security and Medicare, and then require a congressional vote.

This week, Obama proposed a three-year freeze on non-defense discretionary spending — domestic programs under Congress' control — though House Speaker Nancy Pelosi, D-Calif., wants to go further and include military contracting.

Most Republicans scoff at such ideas, saying they're too limited and too tilted toward preventing the kinds of tax reductions that the economy needs.

The pay-as-you-go plan, said Sen. Charles Grassley, R-Iowa, makes it easier to increase spending than to cut taxes. "This double standard is unacceptable," he said.

Reed, the chief executive officer of the Democratic Leadership Council, a moderate research group, urged looking at how mandatory fiscal discipline, no matter how limited, pushes politicians to think harder about spending and makes it easier for them to say no to constituents.

He pointed to last year's debate over how to overhaul the nation's health care system. Obama insisted that any plan not cost more than $900 billion and not increase deficits during this decade.

"That was the hardest part of health care reform," Reid said. "It had been a decade since Congress had had to pay for big new programs."

ON THE WEB

House roll call vote on pay-as-you-go

Sen. Reid's statement on pay-as-you-go

Sen. Gregg's statement on pay-as-you-go

Overview of president's 2011 budget

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For more McClatchy politics coverage visit Planet Washington

McClatchy Newspapers 2010

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