Wednesday, January 09, 2019

Why Progressives Should Support Pay-As-You-Go Budgeting Rules

David Super

Responding to the opposition that some House Democrats, the Economic Policy Institute, Paul Krugman, and others have expressed to pay-as-you-go budgeting rules, I recently published an op-ed arguing that those rules are essential to pursuing the progressive legislative agenda.

Pay-go will not only allow major progressive initiatives but may well be crucial to their enactment.  By themselves, neither a major social initiative, such as Medicare-for-All or universal child care subsidies, nor a major increase in taxes on the affluent and wealthy corporations, is likely to pass.  Worries about the effects on the deficit -- founded or otherwise -- will likely tip the balance against progressive social initiatives in a closely-divided political environment.  And without a clear set of winners -- beyond the general values of fiscal probity -- progressive revenue legislation will have too many powerful opponents and not enough committed supporters.  Married together, as was done in the Affordable Care Act, social initiatives and revenue increases have a far better chance.

In practice, the main effect of pay-go has been to weed out low-priority proposals to manipulate tax rules or target spending for this or that well-funded interest.  Members seeking campaign funds from those interests, and Members from states and districts where those interests have facilities, duly introduce the requested legislation to show their concern.  The inability to find a politically viable offset, however, provides a convenient excuse for the Member when the leadership declines to bring the rent-seeking legislation to the floor.  Without pay-go, the Member will have no excuse not to demand action on the bill and other Members will risk embarrassing that Member if they vote it down.

If progressives do not embrace and sell pay-as-you-go as the proper measure of fiscal responsibility, other, much worse, metrics will take its place, such as the gross cost of an initiative.  Many of the Affordable Care Act's subsequent problems can be traced to unwise decisions to try to hold its gross costs below $1 trillion (regardless of the offsets that made it a net deficit-reducer).  Had more of its implementation costs been covered with permanent appropriations, Republicans could not have starved it in the appropriations process.  The Act's heavy reliance on Medicaid expansion also sought to save federal costs -- with disastrous results after NFIB v. Sebelius.

And if progressives disregard fiscal discipline completely, eventually they will give their opponents an opening for one of the spasms of radical deficit reduction that are billed as "shared sacrifice" but that invariably hit low- and moderate-income people disproportionately hard.  Those budget-cutting frenzies tend to occur around downturns and hence hinder economic recovery.  Those are the true vehicles of austerian economics that progressives should seek to avert.   Pay-as-you-go can help with that.

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