Paygo (Commentary by Jeff Wood)

Suddenly, it seems, many are waking up to the fact that all the red ink in America will not lead to blue skies.

Even President Obama, who is overseeing a massive increase in deficit spending as part of his efforts to pull the country out of the recession and financial crisis, has proposed a plan to allay them.

Obama wants Congress to pass a new “pay-as-you-go” plan – requiring Congress to pay for any new programs either by raising taxes or by cutting the budget in other places. What a novel idea.

It’s something most Americans must do every day to keep afloat. We forgo that island vacation to pay the college tuition. Common sense.

Heck, it even worked during the Bill Clinton administration. He left office with a $250 billion budget surplus after years of deficits. That paygo plan died in 2002, a victim of President George W. Bush’s massive tax cuts. It could be argued those were vastly different times and the economy wasn’t in its current mess. However, when the House reinstated “paygo” in 2007, it always found ways to make exceptions to its constrictions.

It does appear ironic that Obama is now calling for a new paygo policy as he sees the budget deficit heading toward $1.8 trillion by the end of the fiscal year in September – about four times last year’s record deficit of $458 billion.

Alarms are already being set off over the deficit spending, scaring many — even some economists. We can readily understand Obama’s political concerns and his speaking out for Congress to pass paygo.

Yes, huge sums were needed to bail out some banks and companies and to stimulate the economy, but call us skeptical about any paygo plan cutting into the large sums that will be spent on future federal programs. We’ve seen those idealistic plans ignored or overridden too many times. Besides, it would do little to ease the deficit; instead, it only keeps it from growing — as long as there are no exceptions.

Congress still must keep Social Security and Medicare solvent as baby boomers begin to retire. And the president wants some form of a national health care plan, expected to cost more than $1 trillion over the next decade. We predict Obama’s health plan will be an exception not subject to paygo. And we expect the Republicans to make political hay out of that.

More clouds are on the horizon. In the past few weeks, we’ve seen rapid runups in the price of gasoline and in mortgage interest rates, which likely will cause further declines in consumer spending, the engine of the U.S. economy.

Our guess is that, at some point, Congress will have almost no choice but to raise taxes. And that translates into less money for consumers to spend, further slowing any recovery. Don’t look for that, however, until after the next elections.

There are programs that should and can be cut, but that means making the kinds of decisions that can end political careers.

This dance is nothing new. Politicians have been discussing these issues for decades. We don’t expect that to change anytime soon.