Congressional Budget Office Director Douglas Elmendorf on Tuesday spoke before the congressional super committee on deficit reduction, testifying that the U.S. economy will not be able to sustain its current level of spending with the tax cuts now in place as the population ages and health-care costs grow.
A day earlier a coalition of business leaders and former government officials wrote the heads of the super committee urging them to reach a compromise.
Citing the “arithmetic” of his case, Elmendorf told the bipartisan Joint Select Committee on Deficit Reduction, more commonly known as the “super committee,” that putting the federal budget on a sustainable path will require “significant changes” in spending policies, tax policies or both.
“If current policies are continued in coming years, the aging of the population and the rising cost of health care will boost federal spending, as a share of the economy, well above the amount of revenues that the federal government has collected in the past,” said Elmendorf at a public hearing on the history and drivers of the U.S. debt.
Elmendorf added that the task of addressing those “formidable challenges” is complicated by the weakness of the economy and the large numbers of unemployed workers, empty houses and underused factories and offices. “Changes that might be made to federal spending or tax policies could have a substantial impact on the pace of economic recovery during the next few years as well as on the nation’s output and people’s income over the longer term,” Elmendorf said in prepared testimony.
In the aftermath of a politically divided debt-ceiling debate that led to Standard & Poor’s downgrade of U.S. debt, the super committee was formed in August specifically as a bipartisan group. The committee is charged with developing legislation by Thanksgiving that provides $1.5 trillion in deficit reduction over the next 10 years.
On Monday, a diverse group of more than 60 business leaders and former government officials from the Committee for a Responsible Federal Budget sent a letter to super committee co-chairmen Jeb Hensarling and Patty Murray, urging them to “go big” and develop a large-scale debt reduction package that will stabilize the debt as a share of the economy.