How will PayGo Affect Climate Change Legislation?

On Friday, February 12, President Obama signed into law H.J. Res. 45, the Statutory Pay-As-You-Go Act of 2010 (PayGo), which increases the public debt limit from $12.394 trillion to $14.294 trillion; and establishes a statutory Pay-As-You-Go procedure requiring that new non-emergency legislation affecting tax revenue or mandatory spending not increase the Federal deficit.

How will PayGo affect climate change and other environmental legislation?

The Kerry/Boxer legislattion S. 1733 would reduce budget deficits.

The CBO and the Joint Committee on Taxation estimate that over the 2010 to 1019 period enacting this legislation would:

• Increase federal revenues by about $854 billion; and
• Increase direct spending by about $833 billion

In total, those changes would reduce budget deficits (or increase future surpluses) by about $21 billion over the 2010-2019 period. (All estimated effects would be on-budget.) In years after 2019, direct spending would be less than the net revenues attributable to the legislation in each of the 10-year periods following 2019. Therefore, CBO estimates that enacting S. 1733 would not increase the deficit in any of the four 10-year periods following 2019.

BASIS OF ESTIMATE

CBO estimates that implementing this legislation would result in additional revenues, net of income and payroll tax offsets, of $254 billion over the 2010-2014 period and $854 billion over the 2010-2019 period. We estimate that direct spending would increase by $232 billion and $833 billion over the same periods, respectively. Those changes in revenues and direct spending would mainly stem from the process of auctioning and freely distributing allowances under the cap-and-trade programs established under this legislation.

The Waxman/Markey legislation H.R. 2454 would reduce budget deficits.

CBO and the Joint Committee on Taxation (JCT) estimate that over the 2010-2019 period enacting this legislation would:

• Increase federal revenues by about $846 billion; and
• Increase direct spending by about $821 billion.

In total, those changes would reduce budget deficits (or increase future surpluses) by
about $24 billion over the 2010-2019 period. In addition, assuming appropriation of the necessary amounts, CBO estimates that implementing H.R. 2454 would increase discretionary spending by about $50 billion over the 2010-2019 period. Most of that funding would stem from spending auction proceeds from various funds established under this legislation.

BASIS OF ESTIMATE

CBO estimates that implementing this legislation would result in additional revenues, net of income and payroll tax offsets, of $253.2 billion over the 2010-2014 period and $845.6 billion over the 2010-2019 period. We estimate that direct spending would increase by $241.3 billion and $821.2 billion over the same periods, respectively. Those changes in revenues and direct spending would mainly stem from the process of auctioning and freely distributing allowances under the cap-and-trade programs established under this legislation.

The Jobs For Mainstreet Act, H.R., 2847 would add to the deficit.

According to CBO, H.R. 2847, including $75 billion in offsets from TARP, would have the net effect of increasing the federal deficit by $64.8 billion over ten years.

H.J. Res. 45: SEC. 11. EXEMPT PROGRAMS AND ACTIVITIES.

Administration of Territories, Northern Mariana Islands Covenant grants
‘Black Lung Disability Trust Fund Refinancing
Bonneville Power Administration Fund
Continuing Fund, Southeastern Power Administration
Continuing Fund, Southwestern Power Administration
Emergency Fund, Western Area Power Administration
Hazardous Waste Management, Conservation Reserve Program
Payment to Radiation Exposure Compensation Trust Fund
National Oceanic and Atmospheric Administration retirement
Biomass Energy Development
Geothermal resources development fund
Natural Resource Damage Assessment Fund
Contributions to U.S. Park Police annuity benefits
Energy Employees Occupational Illness Compensation Fund

(The White House, CBO Cost Estimate for S. 1733, CBO Estimate for H.R. 2454, GOP.gov for CBO Estimate of H.R. 2847,)