Second, it imposed a pay-as-you-go (PAYGO) rule on tax revenues and mandatory spending, which is spending that continues automatically without an annual reauthorization; entitlement spending such as Medicare, Medicaid, and Social Security makes up most of this category.
The PAYGO rule required that any tax reduction or mandatory spending increase be “paid for” with offsetting tax hikes or spending cuts, so that projected deficits over the 5- and 10-year horizons would not be worsened.