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Congressional Budget Office Director Douglas Elmendorf recommended Tuesday that the 12-member Joint Committee on Deficit Reduction focus on maximizing economic growth by increasing government spending or cutting taxes “in the near-term.”
Elmendorf said deficit cutting plans to decrease spending or raise taxes should be phased in over the “long term” — a balance that could be difficult to achieve for the panel now tasked with finding nearly $2 trillion in savings over the next 10 years.
Elmendorf’s take on the economy came one day after President Barack Obama sent his jobs bill to Congress. The White House bill leans heavily on the super committee to find many of the off-sets for the $447 billion package.
The CBO director’s testimony at the panel’s first hearing today also contrasted starkly with the idea, championed by Congressional Republicans over the summer, that additional spending is detrimental to economic growth as it increases the already-burgeoning federal deficit.
“According to the CBO’s analysis, credible policy changes that would substantially reduce deficits late in the coming decade and over the long term — without immediate cuts in spending or increases in taxes — would support the economic expansion in the next few years and strengthen the economy over the longer term,” Elmendorf told the panel in his opening remarks. “There is no inherent contradiction between using fiscal policy to support the economy today, while the unemployment rate is high ... and imposing fiscal restraint several years from now, when output and employment will probably be close to their potential.”
In the super committee’s second public session in five days, and with just more than 70 days to present Obama with a final package, lawmakers continued to take their stands on how to best tackle their now even more difficult task, while also pressing Elmendorf on his views on the current economic landscape. The conversation in the large hearing room in the Hart Senate Office building underscored what will likely become one of the larger battles of the fall: how can Obama and the Democrats press for more spending and stimulative measures when the group tasked with finding the money to pay for those plans was created under the framework that growing deficits are hurting the economy?
It could prove difficult for the bipartisan group to take Elmendorf’s advice to increase the deficit in the short term while shrinking it over time, especially as Democrats fight to protect entitlement spending and Republicans continue their resolve against tax increases.
“It’s more than just a spending problem, narrowly defined ... many tax expenditures are a form of spending in disguise,” said Sen. John Kerry (D-Mass.), just moments after Sen. Rob Portman (R-Ohio), sitting directly to his right on the dais said, “Clearly, entitlement spending is driving these long-term deficits to impossible levels.”comments powered by Disqus