Nov. 13 (Bloomberg) -- The head of the Congressional Budget Office gave a bipartisan conference committee three choices for cutting the U.S. deficit: increase taxes, make deep cuts in entitlement spending or cut other programs.
Douglas Elmendorf, appearing at the panel’s second public meeting as his office released 103 options to cut the deficit, fended off repeated attempts by Republicans and Democrats to draw him into the debate over taxes and spending.
“Debt is already larger relative to the size of the economy than at any time in our history,” except for a brief period during World War II, Elmendorf said. “The federal budget is on an unsustainable path.”
Lawmakers are at odds over whether ending some tax breaks for wealthier Americans should be part of a deal to replace the automatic spending cuts approved in 2011 that have trimmed funding for defense and domestic programs. The panel is working to bridge differences by a self-imposed Dec. 13 deadline.
The work could be complicated by a request from House and Senate appropriators to agree on a spending target by Dec. 2.
Republicans led by Senator Rob Portman of Ohio, a former budget director for President George W. Bush, sought to show collections are higher by prodding Elemendorf to confirm average U.S. revenue in the next decade, at 18.3 percent of gross domestic product, will exceed the historic average of 17.4 percent.
Senator Sheldon Whitehouse, a Rhode Island Democrat, brought his own chart showing that for every tax dollar the Treasury Department collects, 60 cents goes “out the back door” through special breaks and “loopholes.”
Elmendorf testified as the CBO released a report identifying options for reducing the deficit, including trimming entitlements, raising taxes and cutting other spending such as farm subsidies.
Included on the list: eliminate direct payments to farmers, cut federal pensions, raise the age for Social Security benefits, cancel military programs or cut Amtrak subsidies.
Among the options with the greatest estimated savings are implementing cost-sharing rules for Medicare, at $114 billion, and moving to a different method of calculating Social Security cost-of-living increases starting in 2014, at $93 billion.
On revenues, the CBO estimated the greatest amount would come from a $25 per metric ton tax on emissions tied to greenhouse gases, at $1.06 trillion and eliminating the deduction for state and local taxes, at $954 billion.
Lawmakers have a better chance of agreeing on options that would produce much smaller savings, such as eliminating direct payments to farmers. That option would produce $25 billion in savings over 10 years, according to the report.
The U.S. Treasury Department in a separate report today said the budget deficit narrowed last month, when the federal government was closed for 16 days. Spending exceeded receipts by $91.6 billion in October compared with a $120 billion gap a year earlier, Treasury said.
The two-hour conference committee meeting showed few signs that the two sides are bridging longstanding differences over taxes and spending on entitlement programs.
“I think we can reach agreement,” said Representative Tom Price of Georgia, a Republican and vice chairman of the House Budget Committee. “We need to walk before we can run.”
A major sticking point in reaching any deal, Democrats’ demand for revenue increases as part of a deficit-reduction agreement that includes spending cuts, has scuttled previous congressional budget efforts. At the same time, the lobby backing health and financial programs for seniors is pressing lawmakers to resist changes to Social Security and Medicare.
The conference panel’s leaders -- Senator Patty Murray, a Washington Democrat, and Representative Paul Ryan, a Wisconsin Republican -- are lowering expectations for a bargain to trim the nation’s $17 trillion debt. Both lawmakers, chairmen of their chambers’ budget committees, have instead focused on replacing the automatic cuts known as sequestration that are reducing funds for education, transportation and medical research.
Murray today said she is “encouraged” by her discussions with Ryan for a budget agreement and urged the conference committee to “make some compromises.”
“Our budgets are dramatically different,” Murray said. “We need to step out of our partisan corners.”
Ryan said he and Murray are discussing the parameters of a deal. “But we’re not there yet,” he said.
The panel is running out of time. Representative Tom Cole, an Oklahoma Republican, today said the heads of the House and Senate appropriations committee are asking the panel to agree on a budget as soon as Nov. 22, and no later than Dec. 2 to help avoid a government shutdown in mid-January.
Congress will be in a break starting Nov. 22, making it difficult to meet the request from Republican Representative Hal Rogers and Democratic Senator Barbara Mikulski, head of their chamber’s appropriations committees, Cole said.
“The two bodies are only about $90 billion apart” in their budgets, he said. “We ought to be able to give the appropriators a number.”
The two parties aren’t close on their fiscal positions. Republicans want to replace the across-the-board cuts with savings from entitlement programs including Social Security and Medicare. Democrats say they are open to ideas as long as they’re coupled with revenue increases. Ryan, his party’s vice presidential nominee last year, has ruled out revenue increases.
Leading a coalition against scaling back seniors’ benefits is AARP, which boasts 37 million members.
“Medicare and Social Security, if not on the table, are always on a side table” and seniors can’t let down their guard, David Certner, director of legislative policy for AARP, said in a Nov. 4 interview.
Senator Bernie Sanders, a Vermont Independent, is among a number of lawmakers unlikely to support changes to entitlement programs.
“You left out some very important facts of contemporary America,” he said. “We have the most unequal distribution of wealth and income since the late 1920’s,” said Sanders, noting that the top one percent of Americans have 38 percent of the nation’s wealth while the bottom 60 percent have 2.3 percent.
Sequestration led to $80 billion in automatic spending cuts in March to programs that Democrats consider priorities, including Head Start for poor children and scientific and medical research.
An additional $19 billion cut in Pentagon spending is set to start in January, raising concern among Senate Republicans such as John McCain of Arizona and Lindsey Graham of South Carolina.
In their first budget conference meeting on Oct. 30, Democrats and Republicans revived their dispute over whether to raise revenue.
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