Pay-As-You-Go Rule

The Pay-As-You-Go rule (often shortened to PAYGO) is a budget-enforcement mechanism in the United States that requires Congress to "pay for" new mandatory spending increases or revenue reductions with equivalent offsets — either spending cuts elsewhere in mandatory programs or new revenues. If legislation enacted during a session results in a net increase in the deficit, the rule triggers an automatic across-the-board reduction, known as sequestration, in selected mandatory programs.

PAYGO has existed in two main forms:

• Statutory PAYGO, first established by the Budget Enforcement Act of 1990 as part of the deficit-reduction package negotiated between President George H. W. Bush and Congress. It lapsed in 2002.
• Statutory Pay-As-You-Go Act of 2010, signed by President Barack Obama, which reinstated the requirement in law and remains in force. It is administered by the Office of Management and Budget (OMB), which maintains a "PAYGO scorecard" tracking the budgetary effect of enacted legislation over 5- and 10-year windows.

Separately, both the House and Senate maintain their own internal PAYGO rules (and at times "CUTGO" variants in the House), enforced through points of order during floor consideration. These chamber rules can be — and frequently are — waived by majority vote or by designating legislation as an "emergency."

Importantly, PAYGO applies only to mandatory spending (entitlements like Medicare, SNAP) and revenues; discretionary appropriations are governed by separate caps. Major legislation such as the Tax Cuts and Jobs Act of 2017 and pandemic-era relief bills triggered potential PAYGO sequesters, which Congress then voted to waive, illustrating the rule's political — rather than absolute — constraint on deficit-financed policymaking.