Glossary

PAYGO

A budget rule requiring that new mandatory spending or tax cuts be offset by spending cuts or tax increases.

Also called: pay-as-you-go, statutory PAYGO, PAYGO rule

PAYGO, short for "pay-as-you-go," is a fiscal discipline rule that requires legislation affecting mandatory spending or revenue to be deficit-neutral. If a new law would increase the deficit, it must be paired with offsetting spending cuts or revenue increases.

There are two versions. Congressional rules, adopted by each chamber, bar floor consideration of bills that violate the standard, but they can be waived by a vote. Statutory PAYGO, enacted in 1990 and again in 2010, tracks the effects of new laws on a scorecard and requires automatic cuts through sequestration if the scorecard shows a net increase in deficits at the end of a session. In practice, Congress has regularly passed legislation to wipe the scorecard clean before cuts took effect.

Supporters argue PAYGO prevents the growth of deficits by forcing tradeoffs. Critics say it applies only to new legislation, not to the growth of existing programs, and that it is easily waived. Many Republicans prefer rules that cap spending or favor tax-cut scoring methods like dynamic scoring; other lawmakers exempt tax cuts they expect to grow the economy. Evaluating compliance depends on the CBO score.

Last reviewed November 8, 2026

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Related terms

Sequestration Automatic, across-the-board cuts to federal spending triggered when budget limits or deficit targets are not met. Budget deficit The amount by which federal spending exceeds revenue in a given year, financed by borrowing. CBO score The Congressional Budget Office's nonpartisan estimate of how a bill would change federal spending, revenue and deficits. Mandatory spending Federal spending set by permanent law rather than annual appropriations, including Social Security, Medicare and Medicaid. Budget reconciliation A fast-track budget process that lets the Senate pass certain tax and spending legislation by simple majority, without a filibuster.