Pay-as-You-Go Policy Urged by Obama

US President Barack Obama (L) makes remarks on the principle that new tax or entitlement policies should be paid for, often called PAYGO as House Budget Committee Chairman John Spratt listens at the East Room of the White House in Washington, DC, on June (Jewel Samad/AFP/Getty Images)

A plan that requires Congress to save a dollar for every dollar they spend was laid out by President Barack Obama on June 9.

Speaker of the House Nancy Pelosi and the democratic members of Congress joined Obama in urging the passage of the “pay-as-you-go” legislation during a White House news conference.

Obama said the plan was simple. “Congress can only spend a dollar if it saves a dollar elsewhere. And this principle guides responsible families managing a budget,” he said.

Attempts were made to restore the legislation two years ago by the Democratic Congress, yet could not pass without support from the administration.

“I want you all to know you now have that support,” Obama said. “The fact is there are few who aren’t distressed by deficits. It’s a concern that crosses party lines, geographic boundaries, and ideological divides.”

Obama originally announced the “pay-as-you go” plan (also called PAYGO) along with the Fiscal Year 2010 budget back in May, yet it was overshadowed by the 121 cuts and reductions that were presented in the budget.

Standing by the plan, Nancy Pelosi said that in the 1990s the plan helped the Clinton administration reverse deficits left from the Reagan-Bush years and created four years of budget surplus.

“But when President George W. Bush came to office, he and congressional republicans abandoned the PAYGO rule,” Pelosi said. “A projected surplus of $5.6 trillion was allowed to collapse into more than $5.8 trillion in deficits—a turnaround of more than $11 trillion in the wrong direction.”

Pelosi added that that PAYGO will become the “discipline for all future spending and tax policy.”