Don't Circumvent PAYGO on Jobs Bill

The CBO released an updated cost estimate* of the Senate jobs bill yesterday. This larger bill calls for further increased funding for unemployment insurance and COBRA along with new proposals for increased Medicaid matches, Medicare physician payments, tax extenders, and other spending provisions.

The bill also includes over $37 billion in tax and spending offsets. Assuming that H.R. 4691 becomes law, this bill would increase deficits between 2010 and 2020 by $97.3 billion. (Compare this bill to the House jobs bill here, the first Senate jobs bill here, and the second Senate jobs bill here.)

In the table below, we display both the Finance Committee and CBO estimates of bill, but have adjusted the Finance Committee estimates to reflect passage of H.R. 4691.

Provision Finance Committee Estimate (billions) (CRFB Adjustments) CBO Estimate (billions)
Unemployment Insurance $62.0  
COBRA Extension $10.0  
Medicaid State Matches $25.0  
Emergency Spending (Exempt From PAYGO) $97.0 $95.4
Medicare Physician Payments (Exempt From PAYGO) $6.3 $6.3
Energy Provisions $1.5  
Individual Provisions $5.9  
Business Provisions $13.6  
R&D Credit $6.7  
Disaster Relief Provisions $2.7  
Tax Extenders (Not Exempt From PAYGO) $27.6 $25.7
Pension Funding Relief $5.3 -$2.4
Emergency Disaster Assistance $2.0  
Other Provisions $3.1 $9.9
Temporary Spending (Not Exempt From PAYGO) $10.4 $7.5
Close Black Liquor Loophole -$23.9  
Codify Economic Substance Doctrine -$5.5  
Reduce Medicare Improvement Fund -$8.0  
Offsets -$37.4 -$37.6
Net Effect on PAYGO $0.6 -$4.4
Net Impact on Deficit $103.9 $97.3

*Updated cost estimates from the CBO assume that the second Senate jobs bill (H.R. 4691), providing $10.3 billion for jobs-targeted legislation, becomes law. This revised CBO's analysis of the jobs bill incorporates the costs of H.R. 4691 into its previous estimate for the current jobs bill -- The American Workers, State, and Business Relief Act of 2010. 

The CBO estimate also shows the bill's effect on PAYGO. Since PAYGO requires that all new spending and tax cuts be paid for and not emergency measures or adjustments of current policies, most of the bill's provisions ($101.7 billion) are exempt from PAYGO rules. Thus, only the $33.2 billion in tax extenders and temporary spending measures (above) had to be paid for. However, the bill does include an additional $4.3 billion in offsets.

CRFB is happy to see that more than just $33.2 billion in spending increase and tax cuts were paid for, but we believe that lawmakers should find ways to pay for all of it. In a press release yesterday, CRFB had the following to say about the bill:

"Even if the measures are deficit-financed in the short run to maximize their stimulative effects, though, they should be paired with longer term offsets to ensure the measures do not add to the debt permanently...Our creditors aren’t going to care that we gave ourselves permission to exempt this debt from the rules...

Combining discretionary spending caps with a strict adherence to the spirit of PAYGO can at least stop us from making the fiscal situation worse, and send a signal to markets that we’re serious about addressing the debt"

Policymakers just seem to keep finding ways to get around PAYGO. It's time that we start paying for what we think is important.