Question

Explain the recent proposals of an explicit balanced budget amendment in relation to PAYGO. What are the views of supporters and opponents of these proposals?

Answer 1

The PAYGO or (Pay as you go) is a public law used in United States financing expenditure to ensure that most new spending is offset by spending cuts or added revenue. It compels new spending or tax changes do not add to federal debt. The PAGO rules require a new proposal to be budget neutral on new revenue or offset with savings from existing funds.

Supporters of PAYGO hold a view that that future generations have a right to be protected from debts accumulated by earlier generations. They consider that only a constitutional amendment can be strong enough to rein in lawmaker’s tendency to act in fiscally irresponsible way. They hold a view that normal legislative procedures are unable to rein in debt.

Opponents of PAYGO consider that it will limit the ability of policymakers to use fiscal policy tools in case of recessions or respond to economic shocks. They are of view that PAYGO will fail to meet its objectives. Since it puts restrictions on policymakers they will look for ways to escape it & this may result in devaluing constitution through illegal ways or disrupt federal budgeting & policymaking.