Center on Budget and Policy Priorities

Budget — Federal

Joint Statement by Robert Greenstein and James Horney on the President’s “Pay As You Go” Budget Proposal

President Obama’s proposal to require policymakers to fully pay for all new entitlement increases and tax cuts, rather than deficit-finance them, is an important first step to restore fiscal responsibility. Critics charge that the pay-as-you-go, or PAYGO, proposal is riddled with loopholes, would be ineffective, or is a gimmick. But they are fundamentally mistaken. In light of obvious political realities, the so-called loopholes actually increase the likelihood that the pay-as-you-go rule would be effective in preventing enactment of new policies that would increase the deficit.

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Topics

Basics

The federal budget outlines the U.S. government’s spending plans for the coming fiscal year and how it plans to pay for that spending. The three biggest areas of federal spending in 2007 were defense and security, Social Security, and public health insurance programs, each of which made up roughly one-fifth of the budget. About 75 percent of the money used to pay for these programs came from individuals, through income and payroll taxes. Most of the rest came from business owners, though 6 percent came from borrowing.

Policy Basics:
- Where Do Our Tax Dollars Go?
- Introduction to the Federal Budget Process
- Deficits, Debt, and Interest
- Congress's "Pay-As-You-Go" Budget Rule

Featured Experts

James Horney

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Chad Stone

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Paul Van de Water

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The Center informs the debate over federal budget priorities by analyzing the President’s budget and major congressional proposals throughout the annual budget process. We pay particular attention to the adequacy of funding for programs that assist low- and moderate-income families. We also analyze long-term budget challenges and measures to address them. In addition, we promote measures to improve fiscal responsibility.