The Magic Deficit/PAYGO Yo-Yo

We're told that, in public polls, people are truly and significantly worried about the federal budget deficit. We're usually told that by the same people who want to use the deficit to foreclose on options for progressive governance, something they never do when a Republican is at the helm. And in fact, the signal-to-noise ratio, as it were, on the deficit is pretty much in line with who sits in the White House. Check out these charts:

If public worries about the nation’s fiscal health were perfectly related to the nation’s actual fiscal health, these two charts should be nearly mirror images of each other.

That is, when the deficit represents a higher percentage of G.D.P. (i.e., the red bars pointing downward get longer), you should see more people naming the federal budget as the country’s most pressing issue (i.e., the blue bars going upward should also get longer). Though, of course, you can’t have a negative percent of people complaining about the budget when the country is running a surplus.

In any case, the two measures do look somewhat related, but there are clearly other factors at work.

Americans were concerned about the budget deficit during the 1930s. Nobody particularly likes budget deficits. They sound icky. But harping from fiscal scolds on the deficit clearly impacts the debate, as does proper wording of the polling question.

At any rate, whether people really give a crap about the deficit or whether they are just reacting to selective hyping, this expression of "concern" has produced at least one tangible policy on Capital Hill - a push for "PAYGO," mandating that every new spending program have an offsets of spending cuts or tax increases. I'm somewhat ambivalent on PAYGO; it could force new revenue into the system, or it could stop progressive priorities because the same fiscal scolds demanding "discipline" refuse to cut worthless programs like outdated weapons systems that would pay for the new spending. These suspicions aong liberals are bubbling to the surface:

Most critics cite concerns that the budget ax would fall hardest on the programs needed by their most needy and vulnerable constituents, and not their frustration with Blue Dogs.

“I certainly don’t think anyone should vote against it for that reason,” said Rep. Jerrold Nadler (D-N.Y.). “If they want to use it as a bargaining chip, that’s a different story.”

That’s what Rep. Steve Rothman (D-N.J.) did last week. He proposed a deal at the Democratic Caucus meeting: He’d vote for the pay-as-you-go spending bill, he told the Blue Dogs, if “each and every one” of them would support a government-run healthcare plan for the country.

“I was being playful but somewhat serious,” Rothman said.

Some liberal members have reminded Blue Dogs that they didn’t object to going deeper into debt to pay for tax cuts or to fund the Iraq war, hindering efforts to fulfill what many saw as the mandate from the 2006 election — ending the war [...]

Rep. Emanuel Cleaver (D-Mo.) says CBC members are worried about the deficit, too. But they also feel that their districts bear the brunt of budget cuts.

“We get hurt at every turn,” Cleaver said. “We get fewer earmarks because they say we’re in safe districts. With pay-go, the programs that get cut the most are the ones our districts need the most.”

PAYGO worked decently enough during the Clinton Administration, but the Blue Dogs running things today seem to have it out for those programs that benefit the most vulnerable elements of society. In addition, we had a surplus in the 1990s and a robust economy, so hard choices rarely needed to be made.

PAYGO as a rule doesn't bother me and can even be positive. It's how it's used that bugs:

Something that pure budget analysis doesn’t get at on this subject is just the pure politics of it. A lot of people look around and see a world in which we had PAYGO rules in the 1990s and we declining budget deficits and then a small surplus. Then we had a Republican President and suddenly hugely expensive tax cuts—tax cuts that all Republicans and many Democrats voted for—didn’t need to be paid for. We also had a hugely expensive war that all Republicans and many Democrats voted for that didn’t need to be paid for. And PAYGO rules were suspended. Now there are progressive majorities and PAYGO is magically coming back. And aspirations for universal health care are being constrained by the need to pay.

Now, I think it’s a good thing that the administration has committed to pay for its health care proposals. But ultimately it takes two to tango here. And somehow we’ve gotten into a dynamic where not only Republicans, but also a certain number of moderate Democrats, seem to believe that conservative ideas don’t need to be paid for but progressive ideas do. That’s not a sustainable situation.

Exactly. And the same dynamic can be applied to public opinion on the deficit. When a Republican is in power, practically nobody talks about runaway spending and the public concern about it goes down; when a Democrat succeeds, all of a sudden everyone goes wild about the deficit and public concern expands. It's a sham.