Despite pressure from progressive Democrats, the House rules package for the 116th Congress will include a pay-as-you-go provision, requiring all new spending to be offset with either budget cuts or tax increases, a conservative policy aimed at tying the hands of government.
Alexandria Ocasio-Cortez, who will be sworn in this week to represent a district in New York, will vote against the package, her spokesperson told The Intercept. Rep. Ro Khanna, D-Calif., announced Wednesday that he would oppose it.
Presumptive House Speaker Nancy Pelosi, who will be sworn in on Thursday, has promised for months to restore the pay-go rule, which she instituted when first taking over the speaker’s gavel in 2007. She ran into resistance from progressives, who believe that the rule would make it more difficult for Democrats to pass a host of liberal agenda items, from “Medicare for All” to a Green New Deal to tuition-free public college. Critics also argue that pay-go creates an unlevel playing field, where Republicans get to blow giant holes in the tax code, as they did with the 2017 tax cuts, while Democrats must pay fealty to the deficit.
“There’s enormous appetite in the Democratic Party and among all Americans for major public investment to tackle our nation’s major crises: deepening inequality and structural racism and climate disaster,” said Waleed Shahid, communications director for Justice Democrats, in a statement to The Intercept. “Pelosi and the Democratic Party leadership’s support of Paygo makes actually solving these crises all but impossible. The Democratic Party leadership is unilaterally disarming and shooting themselves in the foot.”
Shahid illustrated this on Twitter with a meme:
The pay-go rule House Democrats will institute is actually an improvement on what House Republicans put into place in 2011. They created a rule called “cut-go,” which required any new spending to only be offset with budget cuts instead of tax increases. The rule didn’t apply, of course, to the Trump tax cuts. “It is terrible economics. The austerians were wrong about the Great Recession and Great Depression. At some point, politicians need to learn from mistakes and read economic history,” Khanna wrote on Twitter.
The Democratic leadership replaced that rule with the 2007 version. The new rule establishes a point of order against any bill that increases the deficit within a 10-year budget window, based on figures from the Congressional Budget Office. The House could attach an “emergency” designation to legislation to get around the pay-go rule: Congress did this in 2009 to pass the economic stimulus package under President Barack Obama. The point of order could be waived by a majority vote of the House. But this gives the Democratic leadership another lever of control on what legislation can advance, as their assent would be critical to exempting bills from the pay-go rule. And members of Congress tend to resist voting to waive the rule, as they worry it creates readymade attack ads.
There is also a Statutory Pay-As-You-Go Act, passed in 2010 under pressure from Blue Dog Democrats, which allows the president to enforce across-the-board cuts if Congress violates pay-go. But the prospect of a president implementing such an unpopular policy is remote. So the House rule looms large by constraining new spending at its source.
Liberals, of course, have plenty of ideas for how to raise revenue. The Trump tax cuts alone offer nearly $3 trillion in potential offsets simply by restoring corporate tax rates, “pass-through” rules on individuals, and inheritance taxes. But the pay-go rule forces Democrats to propose tax increases that Republicans gleefully broadcast. Meanwhile, Republicans, unconcerned with deficits, get to play Santa Claus, freed from having to match tax cuts with anything unappealing.
With Republicans in control of the Senate and the White House for the next two years, major Democratic agenda items won’t be passing, muting the near-term impact of the pay-go rule. But eliminating hurdles to activist legislation that increases public investment may matter in the future, should Democrats take the presidency and Senate in the next election. Progressives have been thinking strategically about how to maximize power since the midterms, focusing on relatively arcane subjects like the rules package and committee assignments.
They didn’t come away completely empty-handed. House Democrats’ rules package includes a series of provisions demanded by the Progressive Caucus. For example, there’s the reinstatement of the “Gephardt rule,” which eliminates the need for a standalone House vote to raise the nation’s debt limit. Under the rule, named for former House Democratic leader Dick Gephardt, every time the House passes a budget resolution, the debt limit increase necessary to accommodate that budget will be deemed as passed.
The rules package also eliminates the mandate on the CBO to include “dynamic scoring” in their assessment of legislation. This means that they don’t have to model the economic impact of legislation and the impact on federal revenues, a pseudoscientific conceit that was used by the Republican majority to make tax cuts look more like they pay for themselves.
Annual ethics training for all members is now mandatory. Nondisclosure agreements can no longer be used to prohibit current or former staff from reporting wrongdoing to relevant authorities. The rules package also bans members of Congress from sitting on corporate boards, a response to the insider trading indictment of Rep. Chris Collins, R-N.Y., who was a board member of a drug company when he received inside information about a failed clinical trial and leaked the information to his son.
House members will also apparently be required to pay for their own discrimination and sexual harassment settlements (although enforcement of that rule is a bit unclear), and House Democrats will be allowed to intervene in the lawsuit attempting to rule the Affordable Care Act unconstitutional. On a more symbolic front, Democrats changed the name of the “Committee on Education and the Workforce” back to its original title, the “Committee on Education and Labor.”
Finally, the rules include the re-establishment of a Select Committee on the Climate Crisis, seen by progressives as a vehicle to develop a Green New Deal legislative package. This 15-member committee — nine Democrats and six Republicans — can hold hearings and issue policy recommendations, but those recommendations must go through the committees of jurisdiction, and the committee will not have subpoena or deposition authority.
House leaders claimed in their release of the rules package that they worked with numerous stakeholders and took into consideration all the viewpoints of the caucus. But like the somewhat defanged climate committee, Pelosi’s pay-go provision has rankled progressives.
Last month, the Economic Policy Institute put out a damning paper arguing that during the Obama administration, pay-go led to unnecessary shrinking of ambitions in areas like health care and an unsuitable response to the Great Recession. “It is terrible economics to view federal budget deficits as always and everywhere bad,” wrote report author Josh Bivens, pointing out that pay-go stunted the economic recovery: “If … public spending following the Great Recession had followed the average path of the recoveries of the 1980s, 1990s, and early 2000s, a full recovery with unemployment around 4 percent would have been achieved by 2013.”
At least one congressional power broker wants progressive Democrats to fight the rules package. “In order for #PayGo to go into effect, it needs to pass the House,” wrote Bernie Sanders adviser Warren Gunnels on Twitter on Tuesday night. “If some 18 Dems vote no, it fails. The vote will take place on Thursday. Will enough progressives have the courage to vote no on the first roadblock to #MedicareForAll, #GreenNewDeal & #CollegeForAll? Let’s see.”
In order for #PayGo to go into effect, it needs to pass the House. If some 18 Dems vote no, it fails. The vote will take place on Thursday. Will enough progressives have the courage to vote no on the first roadblock to #MedicareForAll, #GreenNewDeal & #CollegeForAll? Let's see. https://t.co/9raJ49r5mb
— Warren Gunnels (@GunnelsWarren) January 2, 2019
It would be highly unusual and dramatic for the House to vote down the majority party’s rules package, especially given the other elements of the bill and the relative irrelevancy of pay-go over the next two years. However, progressives will have the ability to revisit the issue down the road.
Under the deal cut for Pelosi to continue as speaker in 2021, she must win a two-thirds vote within the Democratic caucus. There are enough Democrats in the Progressive Caucus to block that vote. So progressives conceivably have two years to create enough opposition to pay-go to force Pelosi to eliminate the rule as a condition for remaining speaker. Getting 2020 presidential candidates on the record about pay-go could be a vehicle for building opposition.