Democrats blame Republicans for not supporting the pay-go rule, but Republicans, like Rep. Dan Lungren, R-Calif., see pay-go as a mechanism to force through tax increases, without reducing spending. In the two failed House AMT bills, Democrats didn't try to pay for the AMT reform with cuts. Instead, they chose to raise taxes on hedge fund managers. Lungren noted, "They were arguing that we needed to raise taxes in order to stop a tax increase."
All Washington knows that the AMT was designed to make sure millionaires pay some taxes; it would not apply to today's middle class if it had been indexed to inflation in 1969. Lungren said he can't support a tax increase to stop a tax increase that never should have happened.
What about Democrats who argue that hedge fund managers should not pay higher taxes? Lungren answered, "You've got to talk to Sen. [Chuck] Schumer [D-N.Y.] about that. He discovered most of those hedge fund managers happen to be Democrats." Schumer opposed the two failed House AMT bills because, he argued, it was wrong to pay for AMT reform on the back of one industry. Considering that only five Democrats voted against the bill, Schumer did not face a hard sell.
National Taxpayers Union spokesman Pete Sepp gave pay-go credit for curbing some spending, but noted that it can't tackle the worst problems because it doesn't address entitlement programs like Medicare. "I'm not knocking it completely, but there are lots of factors other than pay-go that have to fit into the equation of fiscal responsibility."
The Republicans have this going for them: As Lungren told me, folks in his district complain that the size of the federal government is too big; they don't complain that they're paying too little in taxes.
Then again, the GOP didn't cut spending when it led Congress.
As for Democrats, their idea of responsibility is to propose tax increases, albeit new taxes which, they purr, only other people -- smokers, hedge fund managers -- will have to pay. For them, it's a big game of pass the new program, hide the tax increase needed to pay for it, pass some budget gimmicks and let the entitlements roll. In one year, despite the use of budgeting gimmicks to keep it afloat, pay-go became a no-go.
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