Obama pitches pay-as-you-go plan for Congress

By BEN FELLER, Associated Press Writer

WASHINGTON – President Barack Obama is calling for Congress to pay for new increases to federal benefit programs such as health care by raising taxes or coming up with budget cuts — a "pay-as-you-go" system that would have the force of law.

Obama will announce his proposal at an East Room event on Tuesday. The White House released details in advance.

The "PAYGO" plan would also require future tax cuts to be financed by tax increases elsewhere in the code, though exceptions are made for extending President George W. Bush's 2001 and 2003 tax cuts, as well as other tax cuts that are scheduled to expire.

The House and Senate already have their own PAYGO rules, but have routinely found ways around them. For example, a bill to effectively double GI Bill education benefits was enacted last year because of a loophole in congressional rules.

The goal is to avoid increasing a deficit that is already soaring to unimagined levels. Under the proposal, if new spending or tax reductions are not offset, there would be automatic cuts in so-called mandatory programs, though Social Security payments and some other programs would be exempt.

Obama's call for binding legislation comes as a reward to moderate-to-conservative "Blue Dog" Democrats who are big believers in PAYGO. Their votes were crucial to passing a congressional budget blueprint that generally follows Obama's budget.

But Tuesday's plan is a watered-down version of PAYGO proposed just last month in a little-noticed portion of Obama's budget plan. That prior version would have required, on average, all legislation subject to PAYGO to be paid for in the very first year. Tuesday's plan only requires PAYGO legislation to be financed over the coming decade. That mirrors congressional rules and reflects the likelihood that health care reform will add to the deficit in the early years.