Congress, Again, Lacks Any Fiscal Fortitude on Sequestration and PAYGO

On Tuesday night, the House of Representatives passed legislation to address the debt ceiling, automatic spending cuts in Medicare, the Statutory Pay-As-You-Go (PAYGO) Act, and more. While Capitol Hill reporters are mostly paying attention to the bill’s maneuvers on the debt ceiling, taxpayers should actually be most concerned about lawmakers’ continued lack of resolve on automatic spending cuts required by law.

First, some brief background. Congress currently is subject to two laws that provide for across-the-board, automatic cuts to so-called “mandatory” (or direct) spending if lawmakers pass legislation that adds to the deficit. One, from 2010, is the Statutory PAYGO Act. That law says that if, at the end of calendar year, there is a “debit” (or deficit) on six- or 11-year PAYGO scorecards as determined by the Office of Management and Budget (OMB), the President must issue a sequestration order that specifies spending reductions to mandatory programs like Medicare, farm support, Trade Adjustment Assistance (TAA), and more.

The Statutory PAYGO Act was actually passed by only Democrats in 2010, with not a single Republican supporting passage in the House or Senate. But the law has also been toothless: as of this writing, a Statutory PAYGO sequestration order “has never been triggered,” according to the Congressional Research Service (CRS).

The second law that subjects mandatory spending programs to automatic cuts is the Budget Control Act (BCA) of 2011. Though the ten years of discretionary spending caps in the BCA are now over, Congress has again and again and again delayed the across-the-board spending cuts that were supposed to take effect . Or, as CRS explains:

“Under the BCA, the sequestration of mandatory spending was originally scheduled to occur in FY2013 through FY2021; however, subsequent legislation, including … the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136), extended sequestration for mandatory spending through FY2030.”

Translation: with both Statutory PAYGO and the BCA, Congress has kicked the can on across-the-board cuts down the road multiple times over the past decade-plus. In many cases, with Statutory PAYGO requirements, Congress has completely ‘wiped out’ the scorecard so that budget-busting spending bills don’t trigger subsequent spending cuts at all.

With this new bill just passed by the House, Congress is delaying Statutory PAYGO cuts and BCA cuts on Medicare yet again:

  • On Statutory PAYGO, Congress is moving the fiscal year 2022 debits (which mostly come from the American Rescue Plan, and could lead to a $388 billion sequestration order) to fiscal year 2023. Expect them to completely ‘wipe out’ these debits at some point in the 2022 calendar year, rather than ever face necessary spending cuts in response to big increases in the deficit.
  • On BCA cuts to Medicare, Congress is again playing games with sequestration so that they pretend to ‘pay for’ delays in Medicare cuts now with false promises of bigger Medicare cuts nearly 10 years down the road. The gimmick this time around is to extend the zero percent (or ‘no Medicare cuts’) scenario for just three more months (January-March 2022), then phase in a one-percent cut from April-June 2022, then return to two-percent cuts starting in July 2022.[1] Lawmakers pretend to ‘pay for’ these delays by promising bigger cuts (from two percent to 2.25% percent in the first six months of FY 2030). What’s most likely to happen? The one-percent cut to Medicare spending in April through June 2022 will be delayed or canceled, and the promise of bigger cuts in FY 2030 will never come to pass.

Rather than exhibit some kind of remorse for endlessly kicking the can of required spending cuts to future years and future generations, the majority at the House Budget Committee is actually celebrating the fact that Congress avoids this hard decision-making.

They note (emphasis ours):

“Congress has routinely adjusted the scorecard to prevent sequestration, with bipartisan support. It has “wiped” the scorecard, shifted balances to a future year, or exempted specific legislation from the scorecard, including under Republican majorities (see Appendix).”

Indeed, Republicans and Democrats have agreed to avoid Statutory PAYGO cuts time and time again, and have also agreed to delay BCA sequestration cuts again and again. That this action has been bipartisan should not be a point of pride for lawmakers, but a point of shame. In 2010 and 2011, lawmakers promised consequences for themselves if they failed to rein in federal spending and continued to contribute to deficits. Instead of owning up to those consequences, they have spent a dozen years kicking the can down the road.

It’s time for that practice to come to an end. If and when Congress is ready to actually address fiscal discipline and fiscal responsibility, NTU and NTU Foundation have plenty of bipartisan and cross-ideological roadmaps to get them there.

[1] The BCA sequestration cuts to Medicare have been zero percent since May 1, 2020, or more than 1.5 years. Congress delayed any cuts to Medicare through the CARES Act and subsequent legislation, ostensibly because of the COVID-19 pandemic and its impact on medical providers and patients.