Unrig the Rules: The Case for Repealing Congressional PAYGO

November 2, 2020

Our nation is facing once-in-a-generation challenges—a global pandemic that has devastated our economy and taken more than 220,000 lives (in the US alone), the existential threat of climate change, and a massive recession. In the last seven months, the economy has shed 11 million jobs, half of which are permanent losses. There is a growing consensus among economists that we can only address these problems with a bold, expansive program of public investment. A major impediment to spending on the scale these challenges require, however, is “pay as you go” (PAYGO). PAYGO is a budget enforcement mechanism that requires tax cuts and mandatory spending increases to be offset by tax increases or cuts elsewhere in the budget.

In this fact sheet, we focus on three economic and procedural objections to PAYGO:

  • PAYGO perpetuates a flawed and overly rigid view of deficit spending that fails to account for the different budget stance required in a boom versus a downturn;
  • PAYGO places excessive weight on the relatively minor risks of non-offset spending, while ignoring the harms of austerity; and
  • PAYGO impedes effective policymaking.