Wall Street Journal Editorial

March 7, 2008

Congress is starting to move its annual budget outline, and the Members are lucky there's a hot Presidential race. Maybe the voters won't notice that "fiscal discipline," in the phony Beltway phrase, is less disciplined than ever.

Look no further than Kent Conrad, the Senate Budget Chairman and godfather of "pay as you go" budgeting. Paygo requires that new entitlement spending and tax cuts be offset dollar for dollar with spending cuts or tax increases. As House Speaker Nancy Pelosi put it: "Instead of compiling trillions of dollars of debt onto our children and grandchildren, we will restore pay as you go budget discipline."

Well, Mr. Conrad has just announced that paygo has officially gone. Last month he and his fellow Democrats joined hands with Republicans to pass a "stimulus" bill that pads the budget deficit this year by $152 billion. No paygo offsets. Now he's unveiling a budget for fiscal 2008 to add another $35 billion stimulus, this time in spending for home heating subsidies, unemployment insurance, and road projects. Asked if the $35 billion would be offset under paygo, Mr. Conrad replied that it wouldn't be a stimulus if other spending had to be cut.

Mr. Conrad has also announced that the Senate will suspend paygo in order to pass another one-year fix sparing some 20 million taxpayers from the Alternative Minimum Tax. That'll cost $65 billion. A year ago, Mr. Conrad claimed it would be "unbelievably irresponsible" to waive paygo for the AMT fix. This year he didn't even try to enforce the paygo rule, saying, "I can read the tea leaves" in the Senate. But then he claims to "balance the budget" in 2013 by assuming that these same 20 million mostly middle class tax filers will pay the AMT that year.

It gets better. Mr. Conrad is also a leading backer of the farm subsidy bill now in House-Senate conference. That beauty exceeds paygo rules by at least $10 billion through the scam of shifting the timing of the payments outside the five-year budget window.

As it happens, the farm bill also exposes the real purpose of paygo -- to make spending easier but tax-cutting harder. The farm bill is scheduled to expire later this month and the cost of extending it over 10 years is $597 billion. But does paygo require offsetting all the cost of the farm bill? Heavens no. The cost of extending such entitlement programs is already imbedded into the budget "baseline," and thus these programs get automatic extensions. Only new and expanded benefits have to be "paid for."

Meanwhile the Bush tax cuts, which are scheduled to expire at the end of 2010, are not part of the revenue baseline, so extending the capital gains and dividend tax cuts requires budget cuts or tax increases of $215 billion. Paygo thus virtually guarantees a gigantic tax increase in 2011.

Meanwhile, Mr. Conrad's budget adds $18 billion of new domestic spending while it rejects every penny of the $91 billion in Medicare savings over five years that President Bush proposed earlier this year. Medicare is easily the biggest driver of future federal spending, but Democrats won't agree to trim its growth even to 5% a year from 7.5%. As we say, Democrats are lucky no one is paying attention.