On February 12, 2010, President Barack Obama signed H.J.Res. 45 into law, as P.L. 111-139. In addition to an increase in the statutory limit on the public debt to $14.294 trillion, the act contains two titles dealing with budgetary matters. Title I, referred to as the Statutory Pay-As-You-Go Act of 2010, established a budget enforcement mechanism requiring  legislation enacted into law not increase the deficit. Since deficits are calculated by summing changes in direct spending and revenue , it applies to laws making such changes.

Title II, which contains only a single section, pertains to routine investigations by the Comptroller General aimed at eliminating duplicative and wasteful spending.

Section 2  (SPaygo) states that the purpose of the Act is “to enforce a rule of budget neutrality on new revenue and direct spending legislation.” The budgetary effects of revenue and direct spending provisions enacted into law are recorded by the Office of Management and Budget (OMB) on two PAYGO scorecards. These scorecards are cover five-year and ten-year periods, and with each new session of Congress, the periods are extended out an additional fiscal year.

Conceptually, the budgetary effects of PAYGO measures are determined by CBO, which are incorporated by reference into the legislation by statements inserted into the Congressional Record by the chairmen of the House and Senate Budget Committees. In reality, this practice has not been followed and OMB estimates have been used to determine changes in direct spending and revenue.

Fourteen days after the end of a session of Congress, OMB finalizes the two PAYGO scorecards and determines whether a violation of the PAYGO deficit-neutrality has occurred. If a “debit” is determined to exist, then the President orders a sequestration that result in across-the-board cuts in nonexempt direct spending programs to eliminate the debit. Most direct spending programs are exempt from sequestration. If no PAYGO violation is found, no further action occurs and the process is repeated during the next session.

The Statutory PAYGO regimen is applied a permanent basis since no expiration dates are included in the act.