Reinstating a structure like the one formerly provided by the Budget Enforcement Act of 1990 would signal a renewed commitment to fiscal restraint and help restore discipline to the annual budgeting process. Such a step would be even more meaningful if it were coupled with the adoption of provisions for dealing with unanticipated budget outcomes.

The federal budget situation [was]--at least until Hurricanes Katrina and Rita struck the Gulf Coast--...showing signs of modest improvement...Lowering the deficit further in the near term, however, will be difficult in light of the need to pay for post-hurricane reconstruction and relief. But even apart from the hurricanes, our budget position is unlikely to improve substantially further until we restore constraints similar to the Budget Enforcement Act of 1990, which were allowed to lapse in 2002. 

Although the PAYGO budget rule, for example, appeared to help keep legislation from increasing federal deficits for a number of years, PAYGO did not provide a mechanism to deal with the long-term budget imbalances already in place. Thus, it is worth considering whether future budget rules should go beyond the scope of PAYGO and require more fundamental adjustments to spending and taxes. Clearly, there are numerous ways in which budget policy could be adjusted to bring the budget back into balance in the short run and to maintain it over the long run.

As the latest projections from the Administration and the Congressional Budget Office suggest, our budget position is unlikely to improve substantially in the coming years unless major deficit-reducing actions are taken.  In my judgment, the necessary choices will be especially difficult to implement without the restoration of a set of procedural restraints on the budget-making process.

The way I would reconcile my own position is that I think maintaining the tax cuts on...dividends which essentially partially integrates the individual on corporate taxes and eliminating part of the double taxation on dividends I think is a good thing, but because I hold to the position that we should be adhering to PAYGO I think it's necessary to offset it by other means as is required by the law with PAYGO still in effect.

A budget framework along the lines of the one that provided significant and effective discipline in the past needs, in my judgment, to be reinstated without delay. I am concerned that, should the enforcement mechanisms governing the budget process not be restored, the resulting lack of clear direction and constructive goals would allow the inbuilt political bias in favor of growing budget deficits to again become entrenched.