“If current policies are continued in coming years, the aging of the population and rising costs of healthcare will push up federal spending, measured as a share of GDP, well above the amount of revenue the federal government has collected in the past,” Elmendorf testified before the 12 members of the panel, also known as the “supercommittee.” “As a result, putting the federal budget on a sustainable path will require significant changes in spending policies, significant changes in tax policies, or both.”
Sen. Jon Kyl (R-Ariz.) said members of both parties agree that federal entitlement programs are drivers of the nation's debt, and he said many fear that reforming those programs will result in cuts to beneficiaries or in payments to providers. Kyl proposed another alternative.
“We hear a lot of talk about waste, fraud and abuse. It's a trite phrase, but the reality is there's a significant amount of truth to it,” Kyl said. “And I think especially with regard to Medicare and Medicaid, we have to find ways to achieve these administrative savings,” he said, adding that one reason “we haven't attacked this problem” is because the Congressional Budget Office has had a difficult time estimating the potential savings based on approaches to solving the problem. He later asked Elmendorf for the CBO to help the committee find ways to achieve administrative efficiencies.
According to Elmendorf, if policymakers seek both a short-term economic boost and long-term sustainability, the most effective policies would be changes in taxes and spending “that would widen the deficit today but narrow it later in the decade.”