Yesterday, President Obama called for a return to “pay-as-you-go” budget rules (“PayGo” for short.) Here’s how PayGo is supposed to work in theory. Every new dollar of government spending is offset by an equal decrease in spending elsewhere in the budget. Or, alternatively, every dollar of increased spending can be offset by a dollar of new taxes. It works the same way on the tax cutting side, too. Every dollar in tax cuts must be offset by an equal cut in spending.
On paper, it sounds like a pretty good idea. Here’s the problem, though. Read the rest of this entry »