When the Rules Hurt the People They Were Meant to Protect

: How PAYGO Undermines VA and Survivor Benefits

Congress created PAYGO to enforce fiscal discipline. In theory, it’s simple: if lawmakers want to expand benefits or reduce taxes, they must “pay” for it by cutting spending elsewhere or raising revenue. Tidy. Balanced. Respectable.

In reality? PAYGO has become one of the most destructive barriers to improving veterans’ and survivors’ benefits — a blunt instrument that pits veterans against each other, blocks long-overdue reforms, and forces lawmakers to make impossible moral tradeoffs.

It is budget math masquerading as patriotism, and it is hurting the people who have already sacrificed more than enough.

What PAYGO Was Supposed to Do — and What It Actually Does

PAYGO is designed to prevent unchecked spending. But when applied to VA benefits, it creates a political scavenger hunt: find an offset or the bill dies.

Want to increase DIC so surviving families aren’t thousands of dollars below poverty?
Find an offset.

Want to fix toxic exposure gaps?
Find an offset.

Want to update disability compensation formulas, last adjusted when Blockbuster still existed?
Find an offset.

And because Congress often refuses to raise revenue or cut non-veteran programs, lawmakers resort to the cheapest, fastest, most politically convenient offset:

Take from one group of veterans to pay another.

A Clear Example: Funding VA Improvements by Charging Disabled Veterans

Recent proposals to increase Special Monthly Compensation (SMC) and enhance Dependency and Indemnity Compensation (DIC) came packaged with a stunning “pay-for”:

charging the VA home loan funding fee to veterans with disability ratings of 70% and below.

This population has never paid a VA funding fee in the program’s 80-year history. These exemptions exist because disability reduces earning potential and increases financial strain — not because Congress felt generous one day.

PAYGO turns that earned exemption into a bargaining chip.

Why This Offset Is So Harmful

1. It violates the principle that VA benefits are earned, not purchased.

The home loan guaranty program was created in 1944 to help veterans reintegrate, buy homes, and build stability. Charging disabled veterans a funding fee — even on subsequent uses of the loan — fundamentally rewrites that legacy.

Disabled veterans have never paid this fee.
PAYGO says now they should.

2. It creates a two-tiered system of worthiness.

Under this proposal:

• Veterans rated 80–100% remain exempt.
• Veterans rated 70% and below suddenly owe thousands in fees.

This implies disability percentage determines value — a message as insulting as it is inaccurate. Ratings reflect medical impairment, not merit or sacrifice.

3. It financially destabilizes veterans already struggling.

Let’s look at the math:

For the average 2025 VA loan ($398,000), a 3.3% funding fee adds:

• $13,000+ to the principal
• $27,000+ in total costs
• 2 more years before the veteran reaches equity

Veterans start their mortgage underwater because Congress needed an offset.

4. It incentivizes disability rating inflation.

Tying financial penalties to disability percentages encourages veterans to seek higher ratings — exactly what unaccredited claim sharks exploit.

VA OIG repeatedly warns about fraudulent claims and predatory “pay-to-play” operators. Offsets like this would pour gasoline on that fire and jam the claims system even further.

5. It forces veterans to pay for improvements meant to help other veterans or survivors.

This is not shared sacrifice.
It’s selective sacrifice — imposed on the disabled.

Survivors Bear the Weight of PAYGO Too

Dependency and Indemnity Compensation (DIC) remains 12% below other federal survivor programs and hasn’t received a non-inflationary increase since 1993.

Some proposals attempt incremental progress — such as a supplemental 1% COLA for five years — but even then, survivors only reach about 48%, far below the 55% provided in other federal systems.

Why can't Congress fix this?
PAYGO.

Because closing that 12% gap requires money — and lawmakers must “find offsets,” usually at the expense of another veteran.

So surviving spouses remain decades behind parity.
Not for lack of merit.
Not for lack of evidence.
But because of PAYGO math.

Why PAYGO Fails Veterans and Surviving Families

1. It turns promises into negotiable budget lines.

Veterans served.
Families sacrificed.
Benefits were earned the moment the oath was sworn — and paid for in advance with years of service, injury, illness, sacrifice, and in too many cases, life itself.

PAYGO acts like these benefits are luxuries.

2. Congress can — and does — waive PAYGO when it wants to.

For massive tax cuts?
Waived.

For major emergency spending?
Waived.

For foreign aid, economic relief, or high-priority political projects?
Waived faster than you can say “unanimous consent.”

But when improving DIC or SMC or other Veteran benefits come up?
Suddenly, the rules are sacred.

3. It slows or kills bipartisan legislation.

Even popular, widely supported bills get stuck because lawmakers can’t agree on a funding mechanism.

While Congress debates offsets, veterans wait months or years.
Surviving families wait in poverty.
Those harmed by toxic exposure wait while their health deteriorates.

4. It encourages cheap, temporary solutions instead of real reform.

PAYGO punishes comprehensive fixes.
So Congress tends to:

• create pilot programs instead of permanent support
• approve small COLA tweaks instead of structural parity
• nibble around the edges instead of correcting systemic problems

It’s policymaking by duct tape.

5. It uses outdated economic logic for modern realities.

PAYGO predates:

• post-9/11 wars
• generational toxic exposure
• a military suicide crisis
• exponentially rising medical costs
• multiple deployment cycles
• the current housing affordability crisis

The needs changed.
The rules didn’t.

What Congress Should Be Doing

1. Carve VA and survivor benefits out of PAYGO.

Benefits earned through service should not be subject to annual budget horse-trading.

2. Ban offsets that target veterans or survivors.

No more robbing Peter Veteran to pay Paul Veteran.

3. Create a sustainable funding mechanism.

A permanent veterans trust fund — or similar dedicated funding structure — would allow benefit improvements without scrambling for offsets each time.

4. Commit to reaching full DIC parity.

Not incremental crumbs.
Not five-year partial measures.
Parity.

5. Stop pretending budget rules are more important than service and sacrifice.

If Congress can waive PAYGO for political priorities, it can waive it to fulfill moral obligations.

Bottom Line: PAYGO Is a Tool, Not a Moral Compass

Veterans and surviving families already paid the highest costs.
They should not pay again so Congress can say it “followed the rules.”

Rules should never outweigh promises.
Budgets should never outrank sacrifice.
And no veteran or surviving spouse should lose a benefit because Congress refused to look beyond the easiest offset.

If lawmakers truly want to Honor the Contract, they must stop using PAYGO as an excuse - and start treating veterans’ benefits as the earned, essential commitments they are.