NC Budget and Tax Center

Growing the deficit will lead to immediate cuts to core programs in our communities

Congress follows several deficit-control mechanisms that govern tax and spending decisions in any given year to ensure that the deficit does not increase and spending is arbitrarily constrained.

PAYGO, funding caps and are all in play now that the House and Senate have both voted to grow the deficit by at least $1.4 trillion over the next decade.

Since the tax changes proposed would drive multi-year deficits, they must be offset by the equivalent amount according to the 2010 Statutory Pay As You Go Act (PAYGO).  As the Congressional Budget Office reported before the Senate vote, the Senate Tax plan will trigger automatic cuts to Medicare that would total $25 billion, as well as many other programs including those supporting farms and rural investment and student loans.  See this helpful visual to see the range of programs that could be affected by PAYGO with a Congressional vote to grow the deficit.

Funding caps and sequestration — across-the board and automatic cuts — would also likely be required in the next year.  Despite efforts to lessen the harm of this flawed approach to budgeting in 2013, 2014 and 2015, it is unlikely that there will be the will to take the same approach in 2018, particularly after lawmakers in Congress have voted to grow the deficit.  The result will be accelerating further the historic decline in spending on education, health care, economic development and housing.

For a helpful overview of these statutory deficit-control mechanisms, see this piece by the Center on Budget & Policy Priorities.

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