Wall Street Journal Is So Over The Top It's Hard To Know Where To Start

Even by its usual highly partisan position, an editorial in today's Wall Street Journal dealing with the pay-as-you-go rule is so extreme that it deserves to be debunked almost line by line.

First, there's the overall schizophrenic problem the Journal, the White House, and congressional Republicans have with this issue: they don't want to offset the impact of tax cuts on the budget but want the Democrats to comply with the PAYGO rules. The Journal is criticizing them for doing both. But then...

The Paygo Farce
Democrats admit it was all a big confidence game.

Monday, December 10, 2007 12:01 a.m. EST

"Democrats are committed to ending years of irresponsible budget policies that have produced historic deficits. Instead of compiling trillions of dollars of debt onto our children and grandchildren, we will restore pay-as-you-go budget discipline."--Speaker Nancy Pelosi, December 12, 2006
Well, as Emily Littela, the half-witted Gilder Radner character on Saturday Night Live, would have put it: "Never mind." Last week Congressional Democrats formally renounced their ballyhooed budget pledge to offset any new tax cuts

WRONG: PAYGO DEALS WITH MANDATORY SPENDING INCREASES AS WELL AS REVENUE REDUCTIONS. THE WSJ SEEMS TO HAVE FORGOTTEN THAT THE INCREASED SPENDING FOR STUDENT LOANS ENACTED EARLIER THIS YEAR WAS OFFSET WITH OTHER SPENDNG REDUCTIONS.

with other tax increases or spending cuts. We're delighted to see this false promise go, but there's a larger lesson in this failure for the tax and spending battles of 2008.

Senate Democrats gave up on "paygo," as it's called, when they realized they lacked the votes to offset the $50.6 billion cost of protecting more than 20 million middle-class taxpayers from getting whacked by the Alternative Minimum Tax this year. They've spent the year floating all kinds of tax increases to make up the difference. But in the end they passed an AMT relief bill without a penny to pay for it. Paygo is now pay gone.

WASN'T IT THE REPUBLICANS WHO REFUSED TO PROVIDE THE VOTES TO OFFSET THE REVENUE LOSS FROM THE AMT FIX?

We should stress that this is the right decision for the economy and the federal budget. The AMT was never supposed to hit the middle class, and it only does so now because the Democrats who designed it

AMT WAS ENACTED IN 1969 WHEN RICHARD NIXON, A REPUBLICAN, WAS PRESIDENT. THIS WAS BEFORE WATERGATE, SO NIXON STILL HAD SUPORT AND CREDIBILITY IN CONGRESS EVEN THOUGH IT WAS CONTROLLED BY DEMOCRATS. AMT COULD NOT HAVE BEEN ENACTED WITHOUT HIS SUPPORT. HE DID, AFTER ALL, HAVE A VETO THAT HE DIDN'T USE.

failed to index it for inflation and raised AMT rates under Bill Clinton in 1993. With the economy in a slowdown, the last thing anyone needs now is a tax hike.

THE ECONOMY IS IN A SLOW DOWN? TELL THE WHITE HOUSE, WHICH IS INSISTING THAT ECONOMIC GROWTH WILL BE STRONG THIS YEAR AND NEXT.

The budget deficit is a little above 1% of GDP, which is below the 25-year average, and should remain so as long as the economy keeps growing.

THE DEFICIT AS A PERCENT OF GDP WOULD BE AN APPROPRIATE MEASURE IF THERE WERE LITTLE OR NO FEDERAL DEBT. BUT THE ADDITIONAL BORROWING IS ON TOP OF THE RECORD $9 TRILLION IN NATIONAL DEBT REACHED ONLY A MONTH OR SO AGO AND SO IS SIMPLY POURING GASOLINE ON THE FIRE. AND WHO EVER SAID THAT A 25 YEAR AVERAGE IS THE RIGHT MEASURE?

But paygo shouldn't be allowed to expire without everyone kicking sand on its grave. That's because it has been nothing but a confidence game from the very start. Paygo doesn't apply to domestic discretionary spending, and it doesn't restrain spending increases under current law in entitlements like Medicare and Medicaid.

THIS IS A SERIOUS LACK OF UNDERSTANDING ABOUT PAYGO. IT WAS ALWAYS DESIGNED TO DEAL WITH PERMANENT CHANGES IN SPENDING AND REVENUES. A SEPARATE AND VERY EFFECTIVE SYSTEM WAS SET UP FOR DISCRETIONARY SPENDING.

Its main goals are to make tax cutting all but impossible, while letting Democrats pretend to favor "fiscal discipline," a la Ms. Pelosi's boast above.

ABSOLUTELY WRONG. PAYGO WAS SET UP TO DEAL WITH MANDATORY SPENDING INCREASES AS WELL AS REVENUE REDUCTIONS. IN FACT, IT WASN'T USED BY THE BUSH ADMINISTRATION AND REPUBLICAN CONGRESS FOR THE BIG MANDATORY SPENDING INCREASES OF THE PAST FEW YEARS -- PART D OF MEDICARE, THE HIGHWAY BILL, THE AGRCULTURE BILL -- BECAUSE CONGRESSIONAL REPUBLICANS REFUSED TO APPLY IT.

 

In fact, the paygo farce has been unfolding all year. Since the day they took the gavel, Democrats have been using gimmick after gimmick to evade it. The Schip bill for health care, for example, includes a spending "cliff" that disguises its actual cost. It assumes spending would rise to $14 billion in 2012, but then pretends the costs would fall to less than half that level in 2013--which just so happens to fall outside the five-year budget scoring window. Some $60 billion in spending over the next 10 years were hidden through this ploy.
Then there is the House farm bill awaiting action in the Senate. That spending marathon includes between $5 billion and $10 billion in fictitious paygo savings by shifting the date of farm aid payments from one year to another.

AS I REMEMBER, THE WSJ FULLY SUPPORTED THIS WHEN IT WAS ENACTED.

If a Fortune 500 CEO did that sort of thing, he'd be indicted.

DIDN'T DAVID STOCKMAN AND DICK DARMAN DO THIS REPEATED WHEN THEY WERE OMB DIRECTOR? WASN'T THIS A MAJOR WAY THE SAVINGS AND LOAN BAILOUT WAS IMPLEMENTED DURING BUSH 41? DIDN'T DARMAN SHIFT A MILITARY PAYDAY BY A FEW DAYS SO IT WOULD BE COUNTED IN A DIFFERENT FISCAL YEAR? DIDN'T THE WSJ APPLAUD THOSE EFFORTS?

House Democrats realize how humiliating this all is, so they're still vowing to make paygo work. Especially embarrassed are the so-called Blue Dog Democrats for whom "fiscal discipline" is a coat of political protection. John Tanner of Tennessee is so upset he says the Senate paygo abdication "is bordering on criminal," and about 30 Blue Dogs are threatening to vote against AMT repeal without offsetting tax increases. They'd have more credibility if they also opposed the various fiscal gimmicks in the Schip and farm bills, not to mention the 2008 Congressional budget outline that exceeded President Bush's budget request by $22 billion.

LET ME SEE IF I HAVE THIS RIGHT: THE WSJ IS COMPLAINING ABOUT THE BLUE DOGS BECAUSE THEY WANT PAYGO TO BE APPLIED AND TRYING TO BE FISCALLY RESPONSIBLE?

In any case, they'll have to reckon with New York Democrat Chuck Schumer, who helped doom paygo in the Senate. Mr. Schumer runs the Senate Democratic campaign committee, and he's raised boatloads of cash from hedge funds and private equity while winking that he can block the House's tax increase on their "carried interest." Let's see: Paygo, or more cash to elect more Democrats. Which do you think wins?
The larger relevance of this episode concerns the 2008 campaign. Hillary Clinton in particular has made paygo a major campaign theme because it makes her sound like a fiscal conservative while helping to justify tax increases. But, lo, guess who was missing on Thursday when the Senate voted 88-5 to ignore paygo on the AMT? None other than the candidate herself, along with Chris Dodd, Joe Biden and Barack Obama. To quote another Saturday Night Live character, "How convenient."

Mr. Bush, and especially the GOP Presidential candidates, should be using this paygo collapse to explain to Americans what a charade this Democratic line is. The 2003 tax cuts expire in 2010, and paygo will make them all but impossible to extend. Now's the time to bury paygo for good.

FINALLY...THIS IS WHAT THIS IS ALL ABOUT. THE WSJ WANTS THE TAX CUTS EXTENDED AND DOESN'T THINK THE BUDGET IMPACT SHOULD BE OFFSET.

MAYBE I'M MISSING SOMETHING, BUT IF THE TAX CUTS WERE SO IMPORTANT, WHY DIDN'T THE BUSH ADMINISTRATION AND REPUBLICAN CONGRESS JUST ENACT THEM PERMANTLY FROM THE START? WEREN'T THE EXPIRATION DATES JUST A WAY TO GET AROUND BUDGET RULES? WASN'T THIS A BIGGER GIMMICK THAN ANYTHING THE JOURNAL IS COMPLAINING ABOUT?

WHO ABANDONED PAYGO FIRST?