April 25, 2004

WHEN CONGRESS returns from its spring break tomorrow, it must embrace the fiscal discipline of pay-as-you-go rules for both spending and taxation.

Pay-go - which forces Congress to find budget offsets for added spending or tax cuts - was an essential part of a bipartisan move that helped produce four years of federal budget surpluses starting in 1998.

Those rules expired in 2002. Even before that, those rare surpluses not only disappeared under the Bush administration but quickly turned into record deficits that over the next decade could cumulatively total an additional $4.6 trillion.

As we've said before, deficits of this size matter. They cannot continue. We're mortgaging our children's and grandchildren's futures.

The massive shortfalls - a half-trillion dollars this year - partly stem from increased security and defense costs, but they're mainly the result of President Bush's disastrous fiscal mismatch of record tax cuts with unrestrained federal spending. (For fiscal years 2002 through 2004, the percentage increase in domestic discretionary spending increased by 8.2 percent, the fastest rate in 40 years.)

With no foreseeable end to the war on terror and with the impending upsurge in entitlement costs as baby boomers begin retiring, restoration of federal fiscal discipline is essential. It's alarming that pay-go - a major step toward that - is even a matter of dispute.

The Senate, including four Republicans, already has voted for restoring pay-go rules on spending and taxing for five years. But while House Republicans favor pay-go for mandatory program spending, they've stood firm on the questionable principle of cutting taxes even if the lost revenue results in larger annual budget deficits. The chambers' differences are soon to be resolved in conference committee budget negotiations.

This is really a fight over President Bush's drive to make permanent his historic tax cuts. The GOP, while so far doing little to restrain federal spending, wants to enshrine these lower tax rates whether or not the nation can afford them.

Last week, four Washington groups dispersed along the political spectrum - the Center on Budget and Policy Priorities, the Concord Coalition, the Committee for Economic Development and the Committee for a Responsible Federal Budget - joined to call for reinstating pay-go across the board. "A tax cut that is not paid for can be every bit as fiscally irresponsible as a spending increase that is not paid for," their statement said.

Republicans opposing pay-go on taxes would have us believe that they're just fighting to give Americans tax relief.

This argument would have a lot more currency if the Bush tax cuts were not so thoroughly tilted toward benefiting the well-off. And if these tax cuts already were not contributing heavily to mounting federal deficits that very likely will translate into higher consumer interest rates, reduced government benefits and reduced economic growth.

There's no question that the federal deficit needs to be brought under control, and budget-wide pay-go rules have the best record for doing just that.

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