No Deficit of Politics in Debt Limit Vote

Like peanut butter and jelly, diet and exercise, and bourbon and bacon (or is that just us?) PAYGO and spending caps are best when together. You wouldn't know it from the votes surrounding the debt limit increase.

There was a party line vote to reinstate statutory PAYGO, with all Ds for and all Rs against. Meanwhile, the amendment to institute spending caps narrowly failed to achieve the necessary 60 votes with a 56-44 vote, with 43 of the Ds who supported PAYGO opposing the caps.

But the two budget constraints were structured to work together when they were created as part of a budget deal in the 90s, and history tells us that is when they work best.

Without PAYGO, spending caps affect only about 1/3 of the budget -- and much less if parts are exempted such as under the Obama proposal. Likewise, relying only on PAYGO to keep certain parts of the budget from getting worse allows discretionary spending to go unchecked -- growth that has dramatically added to budget imbalances in the past (see this CRFB discretionary spending brief).

Traditionally, Republicans have tended to favor spending caps while Democrats have emphasized PAYGO as a way to control the budget, with Republicans more concerned that PAYGO raises the bar for tax cuts. But a true interest in improving the fiscal picture would include supporting both mechanisms.

As far as the debt ceiling increase goes, it had to be done, but we would have liked to see a smaller increase if for no other reason than to provide another opportunity for discussion such as the one the Senate just had. A number of important amendments were included as part of the vote -- from PAYGO, to caps, to the commission, and even though they all didn't pass, the focus on the issue was helpful in elevating the importance of addressing the growing debt. 

Although a larger increase, such as the one that passed, creates more certainty in the short term that America will not default on its debt (see this instructive CRFB brief on the debt ceiling), it also allows politicians to duck the consequences of their ongoing borrowing binge.

It is highly discouraging that the debt limit was increased without including more measures to control the debt.

Profiles in fiscal courage: