Spending Cuts Examined as Super Committee Meets

A group of six Democrats and six Republicans, the Joint Committee on Deficit Reduction, held a hearing on Sept. 13. Elmendorf testified to them about the best plan for the economy.

WASHINGTON—As the saying goes, one should learn from one’s past. According to Douglas Elmendorf, the director of the Congressional Budget Office (CBO) that would be about the worst thing the United States could do for the economy right now. A group of six Democrats and six Republicans, the Joint Committee on Deficit Reduction, held a hearing on Sept. 13. Elmendorf testified to them about the best plan for the economy.

The nation’s circumstances have changed, said Elmendorf on his CBO blog. As life expectancies increase, so does the cost of health care. These elements “have changed the backdrop for budget policy in a fundamental way,” he wrote.

Based on current projections for health care programs such as Medicare, Medicaid, and the Children’s Health Insurance Program, health care spending may rise to 12 percent of gross domestic product (GDP) by 2012, Elmendorf wrote. It has remained at 7 percent of GDP for 40 years, according to the CBO.

“[American] citizens will either have to pay more for their government, accept less in government services and benefits, or both,” Elmendorf said, comparing Europe’s austerity programs to American policies.

According to Elmendorf, raising taxes and cutting back on government spending now would be a mistake; worsening the economy. It would be wise to allow the deficit to grow now, and make plans to reduce it in the future when the economy is stronger, according to the CBO.

Cutting Spending is Pro-Growth, Says Toomey

Sen. Toomey (R-Pa.) argued that cutting spending and reducing the deficit is itself pro-growth, as excessive deficits have a “chilling effect” on job creators and investment. He published his opening statement to the committee on his congressional website.

The government cannot only cut “redundant and obsolete programs ... which can add up to one and a half trillion dollars, our statutory goal.” Only doing that would not be enough to bring the economy to a “pro-growth and sustainable path,” wrote Toomey in his statement.

It’s not easy, the government must still “protect the vulnerable members of our society,” but Toomey suggested there is no way out of cuts from entitlement programs.

He pushed for “lower marginal rates. ... Our tax code is a national embarrassment. Both parties are guilty of getting it to the point of where it is now.”

Toomey used the example of using ethanol as alternative domestic fuel to provide more agricultural jobs and save Americans more money. “We use the tax code to force Americans to pay more for inefficient sources of electricity ... while huge iconic American corporations can pay little or no income taxes.”

The co-chairs of the bipartisan National Commission on Fiscal Responsibility and Reform urged the super committee to “go big” to reduce the deficit over $4 trillion over 10 years, with $1 trillion coming from the Budget Control Act.

The super committee will “not allow ourselves to be boxed in or pigeonholed by special interest groups, partisans, the media or pundits,” co-chair Sen. Patty Murray (D-Wash.) said in her opening statement at the meeting, which she also published on her congressional website. “We will conduct our business transparently.”

The super committee’s proposal is due by Nov. 23. Congress must pass the proposal by Dec. 23 in order to avoid automatic, across-the-board spending cuts.