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Obama Announces Push for PAYGO

President Obama today announced a proposal to make "pay as you go" budgeting rules -- known as PAYGO -- law. His remarks follow:

Thank you. Thank you all for joining us here in the White House. Before I begin, I want to comment briefly on the announcement by the Treasury Department with regard to the financial stability plan.

As you know, through this plan and its predecessor, taxpayer dollars were used to stabilize the financial system at a time of extraordinary stress. And these funds were also meant to be an investment -- and they were meant to be temporary. And that's why this morning's announcement is important.

Several financial institutions are set to pay back $68 billion to taxpayers. And while we know that we will not escape the worst financial crisis in decades without some losses to taxpayers, it's worth noting that in the first round of repayments from these companies the government has actually turned a profit.

This is not a sign that our troubles are over -- far from it. The financial crisis this administration inherited is still creating painful challenges for businesses and families alike. And I think everybody sees it in their own individual districts. But it is a positive sign. We're seeing an initial return on a few of these investments. We're restoring funds to the Treasury where they'll be available to safeguard against continuing risks to financial stability. And as this money is returned, we'll see our national debt lessened by $68 billion -- billions of dollars that this generation will not have to borrow and future generations will not have to repay.

I've said repeatedly that I have no interest in managing the banking system -- or, for that matter, running auto companies or other private institutions. So today's announcement is welcome news to me. But I also want to say the return of these funds does not provide forgiveness for past excesses or permission for future misdeeds. It's critical that as our country emerges from this period of crisis, that we learn its lessons; that those who seek reward do not take reckless risk; that short-term gains are not pursued without regard for long-term consequences.

At the same time, as we seek greater responsibility from those in the private sector, it's my view -- and the view of those who are standing behind me today, as well as those in the audience -- that greater responsibility is required on the part of those who serve the public as well.

As a nation, we have several imperatives at this difficult moment in our history. We're confronting the worst recession this country has faced in generations, and this has required extraordinary investments in the short term. Another imperative is addressing long-deferred priorities -- health care, energy, education -- which threaten the American economy and the well-being of American families. And we've begun to tackle these problems as well.

But we are also called upon to rein in deficits by addressing these and other challenges in a manner that is fiscally responsible. This, in part, requires the kind of line-by-line review of the budget that is ongoing to remove things that we don't need and make the programs we do need work more efficiently. There are billions of dollars to be saved this way. But much of our effort will entail going after the big-ticket items that drive the deficits.

By ending unnecessary no-bid contracts and reforming the way government contracts are awarded, we can save the American people up to $40 billion every year. In addition, Secretary Robert Gates has proposed a badly needed overhaul of a defense contracting system riddled with hundreds of billions of dollars in cost overruns, and the cancelation of superfluous defense systems unnecessary to combat the threats of the 21st century.

We're also going to eliminate unwarranted subsidies currently lavished on health insurance companies through Medicare, which will save roughly $177 billion over the next decade. And this is part of broader health reform, about which I'll have more to say in the coming days, which will both cut costs and improve care.

So all told, in the next four years the deficit will be cut in half. Over the next decade, non-defense discretionary spending will reach its lowest level as a share of our national income since we began keeping records in 1962.

But we must go further, and one important step we can and must take is restoring the so-called "pay as you go" rule, or PAYGO. This is a rule I championed in the Senate and called for time and again on the campaign trail. Today, with the support of these legislators, including the Speaker of the House, my administration is submitting to Congress a proposal to codify this rule into law -- and I hope that the House and Senate will act quickly to pass it. (Applause.)

The "pay as you go" rule is very simple. Congress can only spend a dollar if it saves a dollar elsewhere. And this principle guides responsible families managing a budget. And it is no coincidence that this rule was in place when we moved from record deficits to record surpluses in the 1990s -- and that when this rule was abandoned, we returned to record deficits that doubled the national debt. Entitlement increases and tax cuts need to be paid for. They're not free, and borrowing to finance them is not a sustainable long-term policy.

Paying for what you spend is basic common sense. Perhaps that's why, here in Washington, it's been so elusive. Of course, there have been those in Washington leading the charge to restore PAYGO, and many of them are here today. I want to recognize Congressman George Miller, who introduced the first PAYGO bill in the House. (Applause.) I want to thank the House Blue Dogs and their leader, especially Baron Hill, who has been a driving force in favor of PAYGO. (Applause.) I want to acknowledge Senator Claire McCaskill, who's shown real leadership on this issue in the Senate. (Applause.) And as I said, I want to acknowledge the Speaker of the House, as well as leader Steny Hoyer, who are here because they understand the importance of this principle and are fully supportive of our efforts.

In fact, two years ago, a new Democratic Congress put in place congressional rules to restore this principle, but could not pass legislation without the support of the administration. I want you all to know you now have that support. (Applause.)

The fact is there are few who aren't distressed by deficits. It's a concern that crosses party lines, geographic boundaries, and ideological divides. But often, in the give-and-take of the political process, the vested interests of the few overtake the broader interests of the many. The debate of the day drowns out those who speak of what we may face tomorrow. And that's why "pay as you go" is essential. It requires Congress to navigate the ebb and flow of politics while remaining fixed on that fiscal horizon.

The reckless fiscal policies of the past have left us in a very deep hole. And digging our way out of it will take time, patience, and some tough choices. I know that in the face of this historic challenge there are many across this country who are skeptical of our collective ability to meet it. They're not wrong to feel that way. They're not wrong to draw this lesson after years in which we've put off difficult decisions; in which we've allowed our politics to grow smaller as our challenges grew ever more daunting.

But I think everybody understands this is an extraordinary moment, one in which we are called upon not just to restore fiscal responsibility, but to once again live up to the broader responsibilities we have to one another. And I know that we can summon that sense of shared obligation; that we have the capacity to change, and to grow, and to solve even our toughest of problems.

And that's at the heart of why we're here. I appreciate the work of the people in this room who've shown a willingness to make hard choices and do the hard work that's essential to overcoming the challenges of the present, while leaving our nation better off in the future. So this is going to be a lift. We know it's going to be tough. I think we can get it done, especially with the extraordinary leadership that is on display here today.

Thank you very much, everybody. (Applause.)

Posted at 2:00 PM ET on Jun 9, 2009  | Category:  Primary Source
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JakeD said:

"Some banks that want out of the Troubled Asset Relief Program may be allowed to buy back the government’s investments at below-market prices. That could cut into taxpayers’ potential profits by billions of dollars."

And it could revive banks faster.

Aside from the fact that banks are in business to make money selling the cheap dollars they buy from the Fed as loans...

...am I not correct in assuming that a shortfall in expected profit is not the same as a loss? Especially when the upside is the intent: to save the banks?

As understand it a change was made in accounting regulations that has allowed banks to re-value the assets they now hold. Meaning that on paper at least, they don't have as many bad loans as we thought. That strikes me as wishful thinking, but I'm not a genious.

Couldn't your criticism have been made moot if the banks (with the help of Bush's treasury sec.) hadn't been allowed to write their own ticket in the first place?

I wonder if what you point out is in fact the way banks always operate with our money.

Posted by: JohnQuimby | June 10, 2009 7:58 PM

"So really, children. WE ARE PAYING THE #@%*&?! money back.
And in the obama tradition, he thinks he can get us to ooohh and aaahhhh about how clever he is for loaning the stimulus money.
Do you get it children?"

Yeah, I get it gramps: the banks are still unregulated.

But thanks to Obama and the stimulus package you can get a government backed SBA term loan through your local bank and use the money to pay off high interest debt from your private lender.

Oooohhh! Ahhhhhh!

Who keeps raising the interest rates on consumer loans?

I've noticed that while the Fed lowered interest rates to near zero, the commercial banks didn't. It took an act of Congress to put a lower interest rate loan on the market.

Where's your free market god now Moses?

Posted by: JohnQuimby | June 10, 2009 7:31 PM

"subtance" = "substance" (darn Spellchecker ; )

Posted by: JakeD | June 10, 2009 5:11 PM

zvelf

You make the case that the Administration should be making. That is that the increases in spending are necessary to get us through a tough economic time.

I do not know if I would agree with that argument but, at least, it would be more honest than their efforts to recreate themselves as budget hawks using gimmicks like PAYGO.

They lose me when they resort to phony stuff like pushing PAYGO. If PAYGO was really a threat to cut spending it would challenged in the courts the way the Gramm-Rudman-Hollings spending restraints were back in the eighties.

You seem too smart of a person to think that PAYGO is actually a serious attempt at reducing deficits. It will only be used as a rationale for increasing taxes.

Posted by: danielhancock | June 10, 2009 4:52 PM

zvelf:

Criticizing the government allowing banks to buy back these investments at BELOW-MARKET prices that could cut into taxpayers’ potential profits by billions of dollars is "substanceless"? Let me guess: you think "subtance" is Rosie O'Donnell claiming that steel doesn't melt?

Posted by: JakeD | June 10, 2009 3:40 PM

Many of the people criticizing Obama here seem oblivious to what the government is supposed to do during a recession. It is accepted wisdom among nearly all economists that government spending increases during a recession to keep the economy moving and thus minimizing job loss and bankruptcy and the destruction of retirement funds. There is no contradiction between spending money to keep the country from going into a Depression and instituting PAYGO once it looks like the economy has started to stabilize. Comparing Obama to Stalin and Hitler is just ridiculous and goes to show just how off the rocker some conservatives have gone. Basically, they accuse Obama of fiscal irresponsibility (when the spending is actually necessary) and then accuse him of hypocrisy when he does something to fix government spending in the long run. In other words, all they are interested in is criticizing for the sake of criticizing even when it’s substanceless.

Posted by: zvelf | June 10, 2009 3:17 PM

It's even worse than that, tjmlrc. The race to repay federal bailout money could end up reducing the amount that taxpayers eventually get back.

Some banks that want out of the Troubled Asset Relief Program may be allowed to buy back the government’s investments at below-market prices. That could cut into taxpayers’ potential profits by billions of dollars.

http://www.msnbc.msn.com/id/30828783/

Posted by: JakeD | June 10, 2009 3:04 PM

Okay. Let me spell this out so maybe even obama can understand it.

obama took our tax money and gave billions to banks to keep them afloat.(We got nothing)
Then the banks, in order to thank us, raised most if not all the interest rates on credit cards and whatever else they could. When the banks raised the interest rates they made oodles of money.
Now they are paying back our money to the Feds, that they raised by sticking it to us in the back.
So really, children. WE ARE PAYING THE #@%*&?! money back.
And in the obama tradition, he thinks he can get us to ooohh and aaahhhh about how clever he is for loaning the stimulus money.
Do you get it children?

Posted by: tjmlrc | June 10, 2009 2:56 PM

Please turn-off the press and spend an hour on CBO spreadsheet
- "DATA" from
http://www.cbo.gov/budget/budproj.shtml
What I found was:
1. $1.6 trillion of the $1.8 trillion defict in 2009 was already locked-in before Obama took office.
2. Ten years from now, deficit is 765B more with Obama spending proposals than without them
3. The main differences are caused by
- Obama's middle class tax cuts
- Obama's middle class tax credits for "making work pay" and children.

In this context, a limited Paygo for mandatory programs makes a lot of sense - you don't want them to blow the up the overall budget.

What would the MSM fill their pages/hours with if they reported the facts???

Posted by: YoungAtheart | June 10, 2009 2:43 PM

President Obama said,
"...it's worth noting that in the first round of repayments from these companies the government has actually turned a profit."

Wait, so banks are paying interest to Uncle Sam? That must really be pissing them off!!!

Almost makes me forget that my credit card interest rate just went up.

Posted by: JohnQuimby | June 10, 2009 1:00 PM

I guess it's time for obama to get out his BFF address book and pick the new

PAYGO CZAR!!!!!!!!!

Posted by: tjmlrc | June 10, 2009 6:19 AM

There seems to be a day by day approach in the Obama Administration. They make announcements without regard to actions they have previously taken or positions they have advocated in the past. It is like each day is a new day and they have no memory of what happened yesterday or the day before.

I think the President must have been biting the inside of his mouth to keep a straight face while he was making this speech. I could not have done it.

In theory PAYGO is good but this announcement is just symbolic because the spending that has raised deficits and the national debt to record levels has already taken place so PAYGO seems like it is way too little and too late. Plus Congress has been pretty adept in the past at getting around spending limitations.

I am trying to make sense of this but it is hard. I guess at some point the President will raise taxes and he can deflect criticism by saying he had to do it because PAYGO is the law. But that will take a while and he will be a laughing stock by then if he puts out more pronouncements like this one.

The Administration is so weak on the issue of fiscal responsibility that it would have been better to have said nothing rather than to publicize the $100 million dollar savings they had found, the $45 billion dollars in budget cuts they requested, and their support for PAYGO.

At least, the President should have had Gibbs, Biden or someone else make this ridiculous speech rather than him personally having to lose stature by putting out nonsense like this.

Posted by: danielhancock | June 10, 2009 2:21 AM

I am glad to seeing the anti-Obama opposing Pay-as-you go. It is a ruse to some extent but it does force the politicians to be extra sly in passing legislation. Except for a few moderate Democrats no one is interested in fiscal soundness.

Posted by: Gator-ron | June 9, 2009 10:54 PM


Thank you, President Obama, for moving forward in support of pay-as-you-go.

Of course our response to the financial crisis required some extraordinary spending. But you have said that this will be temporary, and supporting PAYGO at this point shows that you agree we can't keep increasing the deficit.

Let's hope the Congress is with you on this.

Posted by: mikeinmidland | June 9, 2009 6:01 PM

Just stick to the FREE MARKET and everything works out perfectly. Stop the stimulus packages and start a FREE MARKET economy.
http://planotexaspolitics.wordpress.com/

Posted by: almek11 | June 9, 2009 5:38 PM

Attention David Axelrod, Rahm Emanuel, Team Obama:


WHILE THE ECONOMIC CRISIS CONSUMES POTUS' ATTENTION, DEMOCRACY IS BEING STOLEN AT THE GRASSROOTS...

BY A FEDERALLY-ENABLED AMERICAN GESTAPO VIGILANTE ARMY THAT MAKES A MOCKERY OF THE JUDICIAL SYSTEM IN EVERY COMMUNITY IN THE U.S.


A secretive security/military/intel "program" fronted by federally-funded community policing and volunteer agencies implants covert GPS tracking devices and has deployed microwave radiation "directed energy weapons" to stalk, harass -- and yes, torture -- unjustly "targeted U.S. citizens and their families.

This "program" also targets the livelihoods and finances of its victims -- surely a contributor to the mortgage meltdown that triggered a global economic crisis.

Why hasn't the Civil Rights Division of the Justice Department launched an investigation? Is it because powerful U.S. agencies and commands spawned this "extrajudicial targeting and punishment network" and have covered up domestic, government-enabled atrocities?

Wake up, Team Obama. This "program" is violating civil and human rights -- and endangers the Obama presidency.

Now read this:

http://nowpublic.com/world/gestapo-usa-govt-funded-vigilante-network-terrorizes-america

OR (if link is corrupted / disabled):

http://NowPublic.com/scrivener

Posted by: scrivener50 | June 9, 2009 4:41 PM

LOL - this is like Joseph Stalin demanding that the Politburo respect individual human rights.

Or Adolf Hitler demanding that the Reichstag make sure that Germany renounces war and respects all international borders.

This Obama guy is funny, but it is a droll humor and his show is unbelievably and ruinously expensive.

"Honey, we have to balance our budget. Let's fly to New York for dinner and a show to discuss it."

Tragicomedy.

Posted by: mark_neveu | June 9, 2009 3:02 PM

I'm going to start my diet, as soon as I've finished eating everything at the buffet.

Posted by: island1 | June 9, 2009 3:01 PM

I noted that he managed to get that "inherited financial crisis" blurb in there.

The past, current and future financial crises were, have and will be brought on by ALL of the self serving politicians in America.From potus on down.
Can anyone name me a politician who truly isn't self serving? A politician who doesn't have an agenda like big labor, specious hometown projects or cronyism?

Posted by: tjmlrc | June 9, 2009 2:34 PM

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