The Problem with PAYGO

By Bill Street

There are some in Clackamas County who believe that all government spending is bad. They seem to think that tax dollars once collected are piled on the floor of the Red Soils campus and lit on fire while our commissioners dance around, reciting ancient Celtic incantations. We know from firsthand knowledge that our commissioners can dance, but that does not prove they know any Celtic chants.

Now a group of Blue Dog Democrat congressional representatives have signed a letter decrying that the PAYGO guideline was ignored when passing the Dreamer Protection Act. So what is PAYGO, and should we care?

PAYGO is used to refer to “pay as you go” requirements for legislation. The idea is, if the federal government is going to spend more money with new legislation, it must include a method for funding it. If this was your household budget or perhaps even a very small business, this might make sense. But for the federal government, it leads to extremely bad policy outcomes.

For example: If legislation was passed that provided for every family in the U.S. to have a solar panel on their house or apartment, using PAYGO math it would cost billions upon billions and would never get support since the tax rate increase would be huge. So instead we rely on fossil fuels, pay more for energy, pay more for health care because of carbon pollution and other greenhouse gas pollutants, and watch temperatures rise, which for Oregon means a longer forest fire season.

All because PAYGO only measures the cost to the federal government and not the cost or benefits for us as citizens. The Dreamer Protection legislation, which appears to be the trigger for the letter, had a PAYGO estimate of about $35 billion. It does not calculate the added GNP growth, the reduced crime savings, or the value to our society of “dreamers” being empowered to become productive members of society.

In short, PAYGO is ignorant of the basic concept of “investment.” It only calculates the costs of the investment and does not calculate the return on investment to communities, counties, states, and us as citizens. If it doesn’t directly benefit federal tax revenues, it is a cost.

A related problem is that PAYGO is relatively short-term, while much federal spending is long-term.

Lest we forget, PAYGO logic led by Republicans dramatically decreased the size of President Obama’s recession relief packages. The result of this austerity approach, sold at the time as avoiding massive federal deficits that our children would have to pay, created the slowest economic recovery in recent memory.

As you can see from the chart, per capita spending was low for the 2008/2009 Great Recession — considerably lower than the previous four economic recessions. This failure to invest in ourselves has created the weakest economic recovery in recent memory. We continue to pay the price for 2008’s PAYGO-driven public policy more than 10 years later.

PAYGO has been used by Republicans to message that government spending is wasteful and costly. For any Democratic congressional representative to reinforce that message does a disservice to us all. The extent of economic inequality in our country, the dismal state of our infrastructure, the dysfunctional nature of our health care and education systems all share a common solution: massive public investments.

If we are to regain our leadership role in the world, we need to be investing in mass transit, alternative energy research, public housing projects, education and universal health care. This will not occur under a PAYGO mentality.

Those Democrats who feel the need to reduce the deficit need to focus on what caused it: tax cuts for the rich, a bloated defense budget and an inadequate minimum wage. It was not created by educating our children, feeding our poor and sheltering our homeless.

It is just a tad too convenient to raise PAYGO issues upon the passage of the Dreamer Protection legislation and not hear a word during passage of the defense budget or fossil fuel subsidies.

An té a luíonn le madaí, eiroidh sé le dearnaid.*


* He who lies down with dogs, gets up with fleas.