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Republican Pay-Go Substitute

The Budget Control Act of 2009

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Washington, Jul 22, 2009 | comments
The Republican substitute to the Democrats’ pay-as-you-go [pay-go] bill focuses on the fundamental problem with the budget: spending and deficits. It ensures that Federal spending cannot grow faster than the economy; it establishes a cap on discretionary spending, rather than exempting it as the Democrats do; it rejects the practice of chasing higher spending with higher taxes; and it reduces deficits. The bill assumes the permanent extension of all tax relief provisions enacted in 2001 and 2003, as well as the alternative minimum tax “patch.”

Here is a brief summary:

TOTAL SPENDING CAPS


  • Total Spending Limit. The bill establishes a ceiling on total Federal spending as a percentage of gross domestic product [GDP] that accommodates baseline spending through 2013. During that period, Congress cannot increase net mandatory spending – spending cannot be increased unless offset by commensurate spending reductions – and Congress must begin the process of reforming mandatory programs to ensure spending does not grow faster than the economy.
  • Enforcement by Sequester. If spending grows faster than the economy, an across-theboard reduction (sequester) is applied to mandatory spending, with the following exceptions: Social Security; unemployment compensation during a recession or if unemployment exceeds 6 percent; constitutionally mandated spending; military operations in Iraq and Afghanistan; veterans’ benefits; net interest payments and other legally binding obligations of the Federal Government. To ensure the discipline operates where the problems lie, the sequester applies only to mandatory programs growing faster than inflation, and no program would be reduced by more than 1 percent.

Read the full report here.

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