“The fundamental question for you is not how we got here, but where you want the country to go,” said Douglas Elmendorf, director of the Congressional Budget Office, to the members of the Joint Select Committee on Deficit Reduction (or the supercommittee) today. “What role do you and your colleagues want the government to play in the economy?”
Judging by the debate in today’s congressional hearing, the supercommittee’s members disagree on the answer to Elmendorf's question.
The Republican members, led by co-chair Rep. Jeb Hensarling of Texas, argued that major reforms to entitlement programs are needed to reduce the deficit. The Republicans said that, by keeping taxes low and reducing non-defense spending over the long term, economic growth could both yield increased revenues and limit government expenditures.
The Democratic co-chair, Senator Patty Murray of Washington, and her fellow Democrats mainly argued that spending in the last decade on wars in Iraq and Afghanistan, as well as the current tax rates, caused deep deficits. The Democrats focused on the need to increase tax revenues and echoed President Barack Obama’s call for a “balanced approach” to deficit reduction that would not cut benefits to entitlement programs.
Both sides of the aisle attempted to coax answers out of Elmendorf that would confirm their beliefs, to no avail. Murray, for instance, asked Elmendorf to confirm that a balanced approach of reducing spending, reforming entitlements, and raising taxes was the proper way to reduce the deficit. “As a matter of arithmetic, there are a lot of different paths to reducing budget deficits, and it is not CBO’s role to make recommendations among those alternative paths,” he responded.
Elmendorf said the choice of policy solutions has to be decided by the lawmakers sitting in front of him. “The choices involve not just the effect on the economy,” he said. “They also involve choices about what you want the government to do, what sorts of activities it should be engaged in, what the role of the government should be relative to the private sector. The set of choices in making stimulative policy in addition to doing deficit reduction policy are far beyond our technical role.”
The CBO director continued laying out the stark choice. “If you want a role that has health care programs for older Americans like the ones we’ve had in the past and operate the rest of the government like the one we’ve had in the past, then more tax revenue is needed than under current tax rates,” Elmendorf said. “On the other hand, if one wants those tax rates, then one has to make very significant changes in spending programs for older Americans or other aspects of how the government works.”