Today is a big day for the Blue Dog Democrats. They’ve spent the first 6 months of this administration supine, voting for whatever spending Barack Obama and Nancy Pelosi told them to. As a result, the federal deficit is approaching $2 trillion - with nothing to show for it. All along, Barack Obama has paid lip service to the Congressional budget rule known as PayGo. Today, with much fanfare, Obama called for PayGo to be enshrined into law. You might cynically point out that it has been a rule in the House since the Democrats retook Congress in 2006, and ask why you should expect it to lead to smaller deficits once it is a law.

You would be right to ask the question. But beyond that, you ought to note that PayGo doesn’t even apply to one major category of spending: discretionary spending. It applies only to direct spending (ie, entitlements such as Social Security and Medicare). And Obama has also specifically asked for 4 exceptions to the rule. As a result, the new ‘PayGo’ has more holes in it than swiss cheese.

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The Spectator’s Phil Klein alerts us to the release of the Annual Report of the Social Security and Medicare Boards of Trustees. The Trustees have found that due to the recession, benefits paid out are overtaking revenues brought in even faster than projected. The trust funds for these programs will be bankrupt sooner than expected but more importantly, the programs will become a serious drain on the federal budget far sooner than that. That’s because long before the trust funds are exhausted, Uncle Sam will need to take money from general revenues to ‘repay’ the trust funds.

For years we heard that the trust funds masked the true size of federal deficits; that’s because the government borrowed from the those funds to cover current federal expenditures. Sooner than expected, the flow of funds will reverse, and we’ll be forced to spend hundreds of billions in general revenue to pay for entitlements.

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