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Saturday, December 11, 2010

Budget Enforcement Procedures: House Pay-As-You-Go (PAYGO) Rule

Bill Heniff Jr.
Analyst on Congress and the Legislative Process

The House pay-as-you-go (PAYGO) rule is generally intended to discourage or prevent Congress from taking certain legislative action that would increase the deficit. The rule basically requires that legislation affecting direct spending or revenues not increase the on-budget deficit over sixand 11-year periods. In effect, the rule requires that any legislation projected to increase direct spending or reduce revenues must also include equivalent amounts of direct spending cuts, revenue increases, or a combination of the two.

The House PAYGO rule applies to legislation affecting direct spending and revenues. Direct spending, also referred to as mandatory spending, is provided or controlled in authorizing legislation, generally continues without any annual legislative action, and provides spending authority for such programs as Medicare, unemployment compensation, and federal retirement. Revenues are the funds collected from the public primarily as a result of the federal government’s exercise of its sovereign powers. They consist of receipts from individual income taxes, social insurance taxes (or payroll taxes, such as Social Security and Medicare), corporate income taxes, excise taxes, duties, gifts, and miscellaneous receipts.

The House PAYGO rule does not apply to discretionary spending, which is provided and controlled through the annual appropriations process.

The House PAYGO rule exempts certain direct spending and revenue provisions from being counted in determining compliance with the PAYGO rule: (1) provisions designated as an emergency; and (2) provisions extending current policy in four specified areas, which are scheduled by statute to expire, within certain constraints.

The House PAYGO rule was first established at the beginning of the 110
th Congress. It has been modified twice since its establishment: at the beginning of the 111th Congress, as part of the opening-day rules package; and again in the second session of the 111th Congress, as part of a special rule providing for the consideration of an unrelated measure. In addition, its application to certain legislation was modified during the first session of the 111th Congress, as part of the FY2010 budget resolution (S.Con.Res. 13).

The House PAYGO rule exists alongside similar PAYGO requirements in statute. While the House PAYGO rule and the statutory requirement are similar, especially after the most recent modifications to the House rule, they are different in significant ways relating to when and how they are enforced. The House rule applies the PAYGO requirement during the consideration of legislation on the House floor, applies to each measure individually (with one exception), and is enforced by a point of order on the House floor. The Statutory PAYGO Act, in contrast, applies the requirement to legislation after it has been enacted, applies to the net effect of all legislation enacted during a session of Congress, and is enforced by sequestration—the cancellation of budgetary resources provided by laws affecting direct spending—to eliminate an increase in the deficit resulting from the enactment of legislation.

Date of Report: November 30, 2010
Number of Pages: 13
Order Number: R41510
Price: $29.95

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