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A Project of The Annenberg Public Policy Center

Pelosi Pablum on ‘Fiscal Discipline’

In a Nov. 9 opinion piece for USA Today, House Speaker Nancy Pelosi presented a lengthy list of Democratic accomplishments since assuming control of the House and Senate in January 2007 — including "restoring fiscal discipline to the Congress." That one stopped us.

The fact is the federal government ended fiscal year 2009 with a $1.4 trillion deficit — the highest deficit as a share of the gross domestic product since 1945. And it only dipped slightly to $1.3 trillion in the fiscal year that just ended on Sept. 30.

In her op-ed piece, Pelosi rightfully takes credit for increasing spending to stimulate job growth, provide higher levels of student aid, and give tax credits to small business. But then she says:

Pelosi, Nov. 9: And we did all of this while restoring fiscal discipline to the Congress by making the pay-as-you-go rules the law of the land.

It is true that Congress restored the pay-as-you-go rule, which requires new spending in certain cases to be offset with new revenue or spending reductions elsewhere. The House adopted a PAYGO rule in 2007, and it became the "law of the land" in 2010 legislation. But the new PAYGO law was part of a larger bill that raised the debt limit by $1.9 trillion — a fact the speaker doesn’t mention.

President Barack Obama signed the PAYGO bill into law on Feb. 12, and it was promptly ignored. The PAYGO law was waived less than two weeks later on Feb. 24, when the Senate voted for $15 billion job creation bill.

It is not uncommon for the PAYGO rule to be waived or for new spending to be exempted. The new law is weaker than previous versions. In an Oct. 4, 2010 speech, Federal Reserve Chairman Ben S. Bernanke called for a stronger PAYGO law. He said:

Bernanke, Oct. 4: Currently, the Congress operates under more-limited PAYGO rules. The rules require that offsets for spending increases or tax cuts must be found within a 10-year budget horizon, but they also exempt a number of significant tax and spending programs. Putting aside these details of implementation, given current budgetary challenges, the key question is whether the traditional PAYGO approach is sufficiently ambitious.

With and without PAYGO, the deficit has increased dramatically since Pelosi became speaker, under both Presidents Bush and Obama.

The nonpartisan Congressional Budget Office’s November monthly budget review contains a chart that shows the deficit steadily climbed from $161 billion in 2007 to $459 billion in 2008, and peaked at $1.4 trillion in 2009. By that year, the deficit represented 10 percent of GDP — the highest level since 1945. It was $1.3 trillion, or 8.9 percent of GDP, in fiscal year 2010 — the second highest since 1945.

As the numbers show, the speaker can take credit for spending more money on education, veterans, small business tax credits and other programs, but she can’t also take credit for "restoring fiscal discipline."