CBO Director's Sobering Testimony to the Super Committee
The Joint Select Committee on Deficit Reduction, nicknamed the “Super Committee”, held its first substantive hearing today, entitled “The History and Drivers of Our Nation’s Debt and Its Threats.” The committee heard testimony from Dr. Douglas Elmendorf, Director of the Congressional Budget Office (CBO), and a former Brookings Institute fellow, who was named to the post by Democrats in January 2009. Co-Chair Senator Patty Murray (D-WA) chaired today’s hearing as it was held on the Senate side. She will alternate with her co-chairman, Rep. Jeb Hensarling (R-TX), who will chair the hearings held on the House side.
The Super Committee must identify $1.5 trillion in budgetary savings over ten years from spending cuts and increases in tax revenues by November 23rd. If that does not happen, across-the-board cuts will be triggered by the end of the year, including in defense spending. The panel’s work became even more complicated on Monday as President Obama sent his $450 billion jobs plan to Congress and asked that it be paid for by ending certain corporate tax breaks and limiting tax deductions for the wealthy. In advance of today’s hearing, Rep. Hensarling said that Obama’s plan would “make an already arduous challenge of finding bipartisan agreement on deficit reduction nearly impossible, removing our options for deficit reduction for a plan that won’t reduce the deficit by one penny.”
During the members’ opening statements, many of the Republicans on the 12-member Super Committee blamed the rising cost of Medicare, Social Security and other entitlement programs, as the key drivers of the nation’s debt, while Democrats pointed to the economic meltdown, costly wars in Iraq and Afghanistan, the Bush tax cuts, and government bailouts. Rep. Hensarling made it clear during his opening remarks that the key to credible deficit reduction is a jobs program that does not raise taxes. Rep. Jim Clyburn (D-SC), in contrast, stated that, “We must balance the budget with a balanced approach that includes job creation and revenue raisers.” Sen. John Kerry (D-MA) argued that the panel needs to “go big” and reach savings of more than $1.5 trillion over ten years, easily exceeding the $1.2 trillion in savings that the panel has been required to meet. Sen. Kerry’s call for more than $1.5 trillion in long-term savings follows a letter that more than 60 business leaders and former government officials sent to congressional leaders and the Super Committee yesterday, urging that the panel cut more than the savings it is assigned to find. Among those signing the letter were Roger Altman, founder and Chairman of Evercore Partners, and former Senators Judd Gregg (R-NH) and Bob Kerrey (D-NE). Former Sen. Alan Simpson (R-WY), who co-chaired the 2010 debt commission, has also referred to the Super Committee’s savings goal as “peanuts”. Republican members of the Super Committee have argued that any plan to increase its savings mandate would make a bipartisan agreement impossible.
During his prepared remarks, Dr. Elmendorf warned that the nation’s current economic policies make attaining a sustainable federal budget impossible, citing an aging population and rising healthcare costs specifically. He told the Super Committee that the United States must deviate from its current policies in at least one of three ways: (1) Raise federal revenues significantly above their average share of GDP; (2) Make major changes to the sorts of benefits provided for elderly Americans; or (3) Substantially reduce the role of the rest of the federal government relative to the size of the economy.
Throughout the hearing, Elmendorf made it clear that the United States won’t be able to keep up its spending policies while keeping current tax policies in place. He told the committee that recovery is ongoing but is moving at a much slower pace than anticipated and that the CBO has lowered its forecast for economic growth from the agency’s August estimate of 2.3 percent to about 1.5 percent through the end of 2012. He added that he believes the unemployment rate will stay close to 9 percent during that time period.
The Super Committee launched its website today. The link can be found here http://deficitreduction.senate.gov/public/
