Obama's 'PayGo' Sleight of Hand

In an attempt to defend the trillion-dollar health care overhaul bills currently being marked up in Congress and to shift attention from his own actions to those of his predecessor, President Barack Obama (D-IL) declared in his July 18 radio address that “the same folks who controlled the White House and Congress for the past eight years as we ran up record deficits will argue -- believe it or not -- that health reform will lead to record deficits. That’s simply not true.”

Leave aside for the moment the fact that any deficit-spending records set in “the past eight years” were wiped out by Obama himself within a single month of taking office. Also leave aside the fact that the president’s ire was misdirected (it was the director of the non-partisan Congressional Budget Office, Doug Elmendorf, who made that indictment of the health care overhaul bills currently in Congress). The truth is, Obama’s claim to suddenly care about deficit spending at all is belied by his actions and his administration’s statements on a range of issues, from nationalized health care to the so-called “stimulus” package.

In that radio address, Obama urged legislators to “seize this opportunity -- one we might not have again for generations -- and finally pass health insurance reform this year.” He issued what was intended to sound like a warning along with that plea, saying, “I want to be very clear [that] I will not sign on to any health plan that adds to our deficits over the next decade.”

While this statement was carefully worded to sound like an admonition to legislators against producing a health care overhaul bill that isn’t revenue-neutral, the phrase “deficits over the next decade” is a direct reference to the recommended “Pay-As-You-Go” (or “PayGo”) policy Obama asked Congress to pass in June.

At the time, Obama called on Congress to “to rein in deficits by addressing [current] challenges in a manner that is fiscally responsible.” This, Obama said, meant offsetting each new “expenditure” (including both spending and tax cuts) with a corresponding increase in revenue. The latter, of course, is poorly-disguised code for tax increases, generally targeted at the top 1% of wage earners who are already paying well over half of total taxes in America.

Though Republicans governed under pay-as-you-go guidelines from 1995 until 2001, Democrats added the policy to House budgeting rules shortly after taking control of the Congress in 2007. However, the policy has been waived or ignored several times since due to an unwillingness on the part of Democratic leaders to meet rising entitlement spending with corresponding budget cuts.

Obama’s stated hope is that the policy being enshrined into law will make it more difficult for Congress to waive or bypass it in the future when they want to fund pet projects without cutting spending in other areas. However, the proposed PayGo legislation he transmitted to Congress does allow for the rule to be bypassed in key areas important to Obama -- like his trillion dollar health care overhaul.

Under Obama’s PayGo proposal, lawmakers would have free rein to run up massive deficits in the first several years following passage of health care-nationalizing legislation. In fact, as long as their legislation contained a plan for neutralizing those deficits over the ten-year horizon -- even if they had no intention of actually letting the necessarily massive spending cuts or tax increases ever come into being -- Congressional Democrats could pass as costly a health care overhaul bill as they wanted. Obama would be free to sign such a bill, as well, without breaking his pledge to veto it, having lived up to his promise not to give the thumbs-up to “any health plan that adds to our deficits over the next decade.”

Obama’s sudden focus on reining in that deficit spending not associated with his multi-trillion dollar health care overhaul may come as a surprise to those who recall the rushed passage of the $787 billion American Recovery and Reinvestment Act, or “stimulus package.” Funded entirely by deficit spending -- every one of the $787,000,000,000.00 spent by that legislation was borrowed and went directly onto the debt side of the nation’s balance sheet -- the “stimulus” gave the (at the time) month-old Obama administration the record for an annual American deficit, blowing past the roughly $450 billion rung up in the final year of George W. Bush’s presidency.

This new record deficit came only months after then-candidate Obama twice looked America in the eye during presidential debates and promised a net cut in federal spending. Since the “stimulus” was passed and signed into law (without being read in its entirety by a single voting member of Congress or by the president who signed it), Obama and Vice President Joe Biden have attempted to evade responsibility for the astronomical debt it created, as well as for the utter failure of that massive exercise in deficit spending to create jobs or bring about any semblance of economic recovery.

The administration “misread how bad the economy was,” said Biden, in a lame effort to excuse the failure of the three quarters of a trillion dollars he, Obama, and the Democratic Congress added to the nation’s deficit to create jobs and stimulate recovery. Obama added to that a claim that there was a “lack of information” during the first days of his presidency about just how bad an economic situation he had “inherited” from Bush. The obvious question of why the administration didn’t wait until they actually had reliable information on the economy before setting a new debt record in one fell swoop went predictably unaddressed.

Further, Biden’s words seem to run counter to Obama’s new found belief in balanced budgets -- and of proof of positive outcomes. “We have to go spend money to keep from going bankrupt,” the vice president declared at an Alexandria, Virginia, town hall sponsored by the American Association of Retired Persons (AARP).

“We’re doing things that we know are going to save you, your children and your grand children billions of dollars over the next years,” Biden said, “but we’re not able to prove it.”

Will “we’re right, but we just can’t prove it!” still be the rallying cry of the Obama administration when the entirety of the borrowed “stimulus” money has been spent and jobs still haven’t materialized? Or when Congress predictably decides not to offset the trillions in deficit spending Obama’s PayGo exception is allowing them to engage for the purpose of enacting health care “reform"? Or when the American health care system becomes the costly wreck that is Great Britain’s utterly failed National Health Service, as a result of a poorly-thought out, government-centric health care overhaul being pushed through Congress and signed into law without any serious consideration of the consequences?

For now that remains an open question. If history is any guide, though, the answer to that question will be a resounding “yes.”