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Elmendorf Tells Super Committee to Spend Money Now

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.”

Elmendorf laid out three choices policymakers must “confront” regarding sustainable budget policies, noting that the only way for the government to rein in its deficits “would be for the United States to deviate from the policies of the past 40 years” by either raising federal revenues “significantly above” their average share of GDP, making “major changes” to entitlement benefits or “substantially reduc[ing]” the role of the rest of the federal government “relative to the size of the economy.”

There was a cordial air and an expressed desire by lawmakers in the committee room to find solutions to their now multi-trillion dollar problem, while outside the committee room, Republicans attacked Obama’s jobs package.

Obama’s proposal includes significant payroll tax cuts to both employees and employers, $50 billion in education spending, with $30 billion block-granted to states for “teacher stabilization,” $50 billion in transportation projects and a national infrastructure bank. The president has challenged Congress multiple times, beginning with a speech to a joint session of Congress last week, to pass the measure immediately.

But Republicans do not see the value in some of his offerings and aren’t rushing to approve them, especially if many of the pay-for details will be left to lawmakers not bound to present a plan until Thanksgiving.

“The president can call this bill whatever he wants. But in reality, all he’s really doing is just proposing a hodgepodge of retread ideas aimed at convincing people that a temporary fix is really permanent and that it will create permanent jobs. And then daring Republicans to vote against it,” Senate Minority Leader Mitch McConnell (R-Ky.) said on the floor Tuesday. “If the president is truly interested in growing the economy and putting Americans back to work, then he’ll leave the temporary proposals and the half-measures — and the tax hikes — aside.”

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