Published: Thursday, 23 Jul 2009 | 12:42 AM ET

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A plan to bring the ballooning U.S. deficit under control passed the U.S. House of Representatives on Wednesday, requiring Congress to find savings to offset tax cuts or spending increases.
  

AP US Capitol dome, Washington, DC

The measure, which passed 265 to 166, faces an uncertain future in the Senate. The chairman of that chamber's budget committee, Democrat Kent Conrad, has said it does not go far enough to rein in deficits that are predicted to top a record $1.8 trillion this year.

House Democratic leaders and President Barack Obama say the "pay as you go" legislation could help impose fiscal discipline by instituting across-the-board spending cuts if the cost of new laws is not matched by increased revenues or cuts elsewhere in the budget.

Republicans derided the measure as a loophole-laden public relations exercise that would allow lawmakers to claim the mantle of fiscal responsibility while adding trillions of dollars in new spending, such as the $787 billion economic stimulus package passed in February.

The bill gives House members "an ability to put out a press release to make it look like they're being fiscally responsible," said Paul Ryan, the top Republican on the House Budget Committee.

Democrats face mounting public pressure over the deficit, which is estimated to equal 12.9 percent of gross domestic product this year, and Obama has urged Congress to adopt "paygo" to help him cut the deficit in half by 2013.

Obama, who praised the bill after its passage, told The Washington Post later that a new commission may be needed to examine structural reforms for addressing the budget deficit.

Rules Frequently Waived

Backers like House Majority Leader Steny Hoyer say pay-go helped the government balance its budgets in the 1990s before the Republican-controlled Congress abandoned the approach in 2002 as it slashed taxes and underwrote wars in Afghanistan and Iraq.

"You wanted to do something that you could not and would not and did not pay for," Hoyer told Republicans during debate on the House floor.

The legislation would add the force of law to rules that are already in place but frequently waived.

The bill contains exemptions that could lead to larger deficits over the next 10 years, according to the nonpartisan Congressional Budget Office, including an extension of tax cuts set to expire at the end of 2010 for families that earn less than $250,000 per year.

The agency pegged the cost of these exemptions in an earlier version of the bill at $3 trillion over the next 10 years. The cost is closer to $2.3 trillion in the version that passed the House, a Democratic leadership aide said.

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Hoyer said the exceptions are needed to get enough votes for passage. Programs from space exploration to law enforcement to education would be exempt from the paygo rule.

CBO also said that any across-the-board spending cuts triggered by the paygo bill would likely not be enough to cover the cost of new measures.

Some lawmakers, including Conrad, worry the  egislation would transfer too much power to the Obama administration by allowing the White House's Office of Management and Budget rather than Congress to slash spending if paygo limits are exceeded.

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