March 2nd, 2010
05:31 PM ET
4 years ago

CNN Fact Check: Did pay-as-you-go rules pay down the national debt in the 1990s?

(CNN) - Discussing the budget deficit on Capitol Hill on Monday, Senate Majority Leader Harry Reid revived a long-running debate over the effectiveness of so-called "pay-as-you-go" spending rules.

"With pay-go we have some experience," declared Reid, D-Nevada. "We know it works. It worked during the Clinton years. We paid down the national debt as the result of what happened during the Clinton years. Pay-go was dismissed during the Bush years."

President Barack Obama signed legislation last month that requires the government to offset any spending increases with spending cuts or tax increases. A similar law was in effect in the 1990s.

Fact Check: Did "pay-go" pay down the national debt during the 1990s?

Get the facts and the bottom line after the jump:

– The provision was a key part of Budget Enforcement Act (BEA) of 1990, signed by President George H.W. Bush.

– The annual federal budget deficit began declining as President Bill Clinton took office in 1993, and budget surpluses were recorded from 1998 though 2001. But despite those annual surpluses, the U.S. national debt - which includes interest on money owed from previous years - continued to rise.

– The non-partisan Congressional Budget Office says the BEA "helped to provide budget discipline for most of the 1990s." But it notes that in 1999 and 2000, "Lawmakers enacted record levels of emergency appropriations - which are effectively exempt from budget enforcement procedures - and used other funding devices to boost discretionary spending."

– George W. Bush became president in 2000, and the law was allowed to expire in 2002. The Concord Coalition, a non-partisan anti-deficit group, says many Republicans opposed it because they feared it could be used to block tax cuts.

– The annual budget deficit returned in 2002, just as the rule expired. But the CBO attributes that to the economic slowdown of 2001, not to the elimination of the pay-as-you-go requirement.

– In a 2007 report, the Congressional Budget Office concluded that "pay-go rules probably influence fiscal outcomes, but that influence may be stronger in some instances than others."

Bottom Line:

The budget legislation may have been a factor in eliminating the federal budget deficit for a few years during the 1990s, but it did not reduce the overall national debt.


Filed under: CNN fact check • Harry Reid • national debt
soundoff (21 Responses)
  1. The Voice

    A joke when the GOP or Republicans say they are fiscally responsible, under a Democrat is actually when the deficit was lowered. Thanks to Bush and his cronies they destroyed our economy.

    Now the people want Obama to fix it in one year??? Insanity!

    March 2, 2010 06:13 pm at 6:13 pm |
  2. Another Reformed Republican

    I think if you do some serious fact checking that you will find that the national debt was reduced slightly during some of the Clinton years. Certainly the republicans have done nothing to reduce the national debt since republican icon, Ronald Reagan, cause the debt to explode. Check it out!

    March 2, 2010 06:22 pm at 6:22 pm |
  3. P.S.

    Bush became president in 2001. He was elected in 2000. Come on CNN.

    March 2, 2010 06:23 pm at 6:23 pm |
  4. Victim of GOP Taliban

    No but cutting the defense budget, closing military bases no longer of use and cashing-in on end of Cold War dividend check did. TIme to end the War on Terror and War on Drugs to fix the budget.

    March 2, 2010 06:25 pm at 6:25 pm |
  5. Kim

    This is what we have been trying to tell the republicans but they're too dumb to realize it. Cowboy Bush and his republicans friends are the ones who got us into this mess anyway!

    March 2, 2010 06:26 pm at 6:26 pm |
  6. Kim

    No one should listen to the Republicans ideas because they're just a bunch of old farts that got us in this mess anyway.

    March 2, 2010 06:28 pm at 6:28 pm |
  7. Four and The Door

    When extension of unemployment benefits is considered an emergency in order to slip it through without paying for it, why even bother talking about fiscal discipline? It means nothing.

    I wish Harry Reid and Barack Obama tried as hard to revive the economy as they do to find new entitlements. They did the experiment and the results are in ( again ). Massive government spending may be fun for the politicians but it sucks for creating jobs and reviving an economy.

    March 2, 2010 06:32 pm at 6:32 pm |
  8. Mike in MN

    One thing is for sure. If the Democrats don't start following the pay as you go rule, like they said they were going to do, it won't reduce anything.

    March 2, 2010 06:32 pm at 6:32 pm |
  9. William Salas

    The budget legislatiion may have been a factor in ELIMINATING the federal budget for a few years during the 1990's, bue DID NOT REDCUCE the national debt??????????????????

    If that's not a contridiction in terms, I'll eat my HAT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    March 2, 2010 06:37 pm at 6:37 pm |
  10. Jon In Madison

    Why are they touting Pay-Go successes at the same time as blaming Bunning for enforcing the Pay-Go standard

    March 2, 2010 06:41 pm at 6:41 pm |
  11. Former Republican, now an Independent

    At least President Clinton had us going in the right direction. It didn't take President Bush long to reverse that trend though, as he cut taxes to benefit the wealthiest 5% of the nation and in doing so, crippled the middle class. What a waste and what a shame to destroy the budget surplus trend.

    March 2, 2010 06:54 pm at 6:54 pm |
  12. ib

    only on paper I think.

    March 2, 2010 06:58 pm at 6:58 pm |
  13. Brian

    Clinton NEVER ran a budget surplus. It only appeared that way due to some accounting tricks involving the 'borrowing' of money from other government agencies such as the Social Security Fund. Go to google and search – clinton intragovernmental holdings and click the first link (craigsteiner.us) and you will get the longwinded explanation of how it worked.

    March 2, 2010 07:03 pm at 7:03 pm |
  14. Chris

    The "bottom line" makes no sense. Won't eliminating the federal budget deficit for a few years necessarily reduce the debt? That's like saying someone who has a 30 year mortgage and makes payments on it for two years hasn't reduced his debt. What gives?

    Obviously, when the government chooses to put some things "off-budget," that throws all the calculations out of whack. But if that is the point here, it certainly isn't expressed clearly.

    March 2, 2010 07:11 pm at 7:11 pm |
  15. LacrosseMom(the real one)

    That's fine, but we have millions unemployed. Here is how Congress can pay for those who need unemployment and Healthcare:

    1. Stop all Foreign Aid, to Japan, etc.!

    2. Close all foreign bases, bring our Troops home!

    3. End the wars!

    4. Ask the MILLIONAIRES in Congress to work for FREE!

    Just a few ideas!

    March 2, 2010 07:19 pm at 7:19 pm |
  16. Tom Dawson

    I like your new (to me anyhow, and I'm a "regular" with CNN.com and CNN-TV) "Fact Check" under the "Bottom Line" on many articles. Excellent idea. With articles where you invite comments, I'm sure someone who might disagree with the "Fact Check" could go in with their own opinion which would add another dimension to the "Add a comment" section.

    I'll skip commenting on "pay-as-you-go" since I gave up years ago trying to figure out how the US Governement spent (wasted?) huge amounts of funds, if it actually saved anything by cutting programs, and where the money to spend actually came from or if they just printed more, and more and more.......One thing I do know and comment on is the fact that now-a-days, with more transparency (from internet and related communications) in everything that's done by the government, there seem to be a lot of government related illegally handled funds, payoffs, "campaign contributions" et al coming to the surface which do absolutely nothing for the American public/taxpayers except waste their hard earned taxes and keep some politicians, etc. in lots of "spare change".

    March 2, 2010 07:25 pm at 7:25 pm |
  17. Brian from NJ

    How can you have a surplus anything when your debt is still increasing?

    They borrowed money from themselves through the government securities that Social Security, by law, must buy when it has a surplus. They spent the money and the total debt increased...

    Only in DC could they borrow money from themselves to pay for other things and claim they had a surplus... and people still buy this load of crap!

    March 2, 2010 07:33 pm at 7:33 pm |
  18. Henry Miller, Libertarian, Cary, NC

    "Lawmakers enacted record levels of emergency appropriations..."

    And this is exactly what Jim Bunning was trying to prevent, declaring routine things "emergencies" for the sole purpose of circumventing the PAYGO requirements.

    March 2, 2010 08:32 pm at 8:32 pm |
  19. Victor Matheson

    It would be nice if fact checkers at CNN had some basic grasp of economic principles. If the pay-go rules reduced deficits, then the pay-go rules also reduced the national debt to a level lower than it would have been without the pay-go rules.

    One can say that the national debt increased despite pay-go rules, but it is a logical fallacy to argue in one breath that pay-go rules worked to reduce annual deficits but in another that they failed to reduce the national debt when the national debt is simply the sum of past deficits.

    Couldn't you guys have the phone number of at least one economics professor who teaches principles of macroeconomics in your Rolodex?

    March 2, 2010 08:37 pm at 8:37 pm |
  20. Denna

    So there you have it. It did not reduce the overall debt. One way to reduce our debt load is to stop compensating these senators and congressmen so much. In fact, since the Rethugs are so responsible, I vote that they be the first ones to pay for their own healthcare expense. And no more expense accounts either. In fact, I believe that any congressman or senator who takes money from lobbyist should not even be paid. I mean, really, how much money do you need to live on? Most of us are living on a lot less and we really work and contribute to this country.

    March 2, 2010 08:43 pm at 8:43 pm |
  21. Ken in NC

    Pay-As-You-Go is not really needed any longer. At the rate we are going the Chinese will be on the Capitol steps soon with the "FORECLOSURE" sign written in Chinese. Congress will be evicted and homeless, our cash will be burned and replaced with the Chinese Yuan.

    We better straighten up and fly right and stop this fighting among ourselves or we are doomed because while we fight among ourselves the vultures are circling and waiting to down the pickings that are left..

    March 2, 2010 08:45 pm at 8:45 pm |