–Congressional Budget Office Chief To Testify Tuesday To Key Panel
–CBO’s Elmendorf Told NY Fed In June That Fundamental Reforms Needed
–CBO’s Elmendorf Warned Simpson-Bowles Panel About Health Entitlements

By John Shaw

WASHINGTON (MNI) – Congressional Budget Office Director Doug
Elmendorf will be the lead-off witness this coming Tuesday before
Congress’s Select Committee on Deficit Reduction to discuss the
“drivers” of the United States’ growing deficits and debt.

Elmendorf has given frequent talks on this topic, including
testimony to the Simpson-Bowles Commission in June of 2010 and a
briefing to the Federal Reserve Bank of New York this past June.

The CBO chief’s bottom line conclusion is clear.

“Growth in spending on health care programs remains the central
fiscal challenge,” he said in his testimony to the Simpson-Bowles panel.

Elmendorf said the combination of an aging population and steadily
rising health care costs are putting dramatic upward pressure on the
federal spending — and this will only intensify in the coming decades.

He told the Simpson-Bowles Commission that controlling the U.S.’s
rising deficits and debt will require action to control this spending
surge and to increase revenues.

“Keeping deficits and debt from growing to unsustainable levels
would require raising revenues as a percentage of GDP significantly
above past levels, reducing future outlays sharply relative to CBO’s
projections, or some combination of those approaches,” he said.

The CBO chief made these same points during his presentation this
June to the New York Fed.

In one of his powerpoint slides, Elmendorf said the costs of Social
Security, Medicare, Medicaid and the Children’s Health Insurance Program
have risen substantially relative to GDP, from 4.3% in 1971 to 8.7% in
2007 before the recession.

He said that federal spending on major mandatory health care
programs is set to rise from an average of 2.9% of GDP over the past 40
years to a projected 6.9% of GDP in 2021.

“The aging of our population and the rising cost of health care
have changed the backdrop for federal budget policy in a fundamental
way,” he said in his blog summarizing his address to the New York Fed.

“Putting fiscal policy on a sustainable path will require
significant changes relative to our historical experience in popular
programs, people’s tax payments or both,” Elmendorf said.

The congressional panel, officially called the Joint Select
Committee on Deficit Reduction, is charged to submit a report to
Congress by Nov. 23, 2011 that reduces the deficit by $1.5 trillion
between 2012 and 2021.

The final package, if one is agreed to by the majority of the
panel’s 12 members, must be voted on without amendment by the House and
Senate by Dec. 23, 2011.

If the panel fails to agree on a spending cut package, a budget
enforcement trigger would secure $1.2 trillion in budget savings through
across-the-board cuts.

The cuts would be equally divided between defense and non-defense
programs but would exempt Social Security, Medicaid and low-income
programs.

** Market News International Washington Bureau: (202) 371-2121 **

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