The pay-as-you-go rule, also known as PAYGO, is designed to encourage Congress to offset the cost of any legislation that increases spending on entitlement programs or reduces revenues so it doesn’t expand the deficit.
Under PAYGO, Congress must pay for such legislation by reducing other entitlement spending or increasing other revenues.
Congress can, however, waive PAYGO for a particular bill with the support of 60 senators and the majority of the House of Representatives. Also, PAYGO does not apply to discretionary programs (the programs Congress funds each year through the appropriations process), which are limited instead by the annual spending targets set in congressional budget plans.
SOURCE: Center on Budget and Policy Priorities