Strengthen PAYGO with House Rules Reforms

When the 117^th Congress begins in January, lawmakers in the House of Representatives can advance fiscal responsibility and better budgeting practices by passing a House rules package that includes substantive reforms to the congressional budget process.

The upcoming House rules package should strengthen Pay-As-You-Go (PAYGO) practices, which are meant to keep new legislation from increasing deficits. PAYGO reforms can affect budget-related legislation at early stages, that is, before floor votes, which is when rules are most likely to be waived. In this way, PAYGO could encourage committees and Members of Congress to address shortcomings at the committee level or when legislation is drafted, instead of assuming that discrepancies will be corrected later. PAYGO has an exception for emergency legislation, so it is not an obstacle to legislation addressing the current health and economic crisis.

The rules, practices, and precedents of the House and Senate guide each chamber’s operations and outcomes. As the origin of appropriations and revenue legislation, the House has substantial influence over the federal government’s fiscal agenda. Reforms to House rules such as the following could strengthen PAYGO and therefore improve the budget process and fiscal outcomes. Congress should consider complementary changes in statute.

Require CBO/JCT to Include Interest Effects in Cost Estimates

Cost estimates from the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) currently do not incorporate debt service effects. The impact is most significant when Congress provides new spending or reduces taxes immediately with offsets entirely absent or at the end of the budget window, which can qualify as a budget gimmick.

As a 68-member bicameral, bipartisan letter advocates, CBO and JCT should include interest effects in their cost estimates. CBO recently published a tool for users to calculate the effects of spending and revenue changes on debt service, and CBO should take the next step and include interest effects in all cost estimates. The Enzi-Whitehouse Bipartisan Congressional Budget Reform Act also includes this requirement. This more complete measure could apply both specifically to House PAYGO rules and generally to budget enforcement.

Provide Cost Estimates Prior to Markups

Members of Congress and the public should know the fiscal impact of legislation before a committee considers it. In other words, official cost estimates from CBO or JCT should be available before a markup takes place. This additional information would foster deliberation and substantive amendments at a stage in the legislative process that remains relatively open. JCT already routinely provides estimates for tax measures prior to markups in the Senate Finance and the House Ways and Means committees.

Since CBO and JCT already provide numerous private estimates for committees, this requirement could potentially increase their workloads. Delaying the effective date or setting a de minimus threshold may be appropriate to ensure that CBO and JCT have enough capacity for their missions while the Budget, Ways and Means, and Appropriations committees review if additional resources would be necessary.

Apply PAYGO to Committees

PAYGO exists in statute and in Senate and House rules. The House PAYGO rule states that legislation to increase direct spending or reduce revenue must include offsets so that it does not increase deficits. However, this requirement does not apply until the legislation has already advanced through committee and is being considered on the floor. Facing a binary choice at that point, Members may be tempted to set PAYGO aside, in order to advance policies they otherwise support.

The House can strengthen PAYGO by applying it earlier in the process. Committee rules incorporate House Rules by reference, so Members could explicitly apply PAYGO to committees in the House rules package or when adopting committee rules. At the very least, rules could require committees to include a statement in the report accompanying marked-up legislation stating whether or not the measure complies with PAYGO, and if not, why not.

Include Offsets and/or Refer Legislation to Other Committees for Offsets

When reporting non-emergency legislation, committees should either offset deficit-increasing provisions from within its jurisdiction or specify potential offsets in other committees and refer the legislation there so that legislative text with those offsets can be added. Furthermore, upon receipt of a committee report indicating that a bill would increase the deficit, the Clerk could recommit the legislation to the original committee or refer it to other committees until the bill is fully offset. While this would significantly change House procedures, current practices do not offer transparency or sufficient opportunities for most Members to propose and consider offsets.

Require Budget Committees to Track and Report on Committee Activity

Little easily accessible reporting exists on whether the authorizing committees and the appropriations committee adhere to the budget rules. The Budget Committee reports on the effects of enacted legislation in the Congressional Record, but that and other useful information—including committee deviations from the budget resolution, the budget baseline, PAYGO rules, and emergency designations—would be easier to find on the Budget Committee’s website. The Senate Budget Committee now tracks Senate committees at the direction of the chairman, and the House Budget Committee could as well.

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Strengthening PAYGO is important, and additional budget process reforms could increase transparency and improve outcomes. Many groups have proposals that would improve the budget process. the Committee for a Responsible Budget’s Better Budget Process Initiative includes many options . The 2018 Joint Select Committee on Budget and Appropriations Process Reform agreed on several rules changes (though not a final package). In addition, the Republican Study Committee, the Blue Dog Coalition, the Problem Solvers Caucus, and the Select Committee on the Modernization of Congress have called for improvements to House rules.