–Congressional Budget Office Chief: Econ Outlook Is ‘Highly Uncertain’
–CBO’s Elmendorf: Deficits May Dip For Decade, But Then Will Surge
–Aging Population, Rising Health Care To Drive Deficit

By John Shaw

WASHINGTON (MNI) – U.S. Congressional Budget Office Director Doug
Elmendorf said Tuesday the United States’ budget deficits could dip in
the coming decade as the economy gains strength, and if tax and spending
policies unfold as specified in current law, but they will rise again to
unsustainable levels unless key fiscal reforms are made.

In testimony before Congress’ Select Committee on Deficit
Reduction, Elmendorf said the combination of rising health care costs
and an aging population are poised to wreck havoc on the federal budget.

“Beyond the coming decade, the fiscal outlook worsens, as the aging
of the population and the rising costs of health care exert significant
and increasing pressure on the budget under current law,” Elmendorf
said.

Elmendorf said various scenarios show U.S. debt reaching
“unsustainable levels” by 2035 unless major fiscal changes are enacted.

The CBO chief said the U.S. government is confronting “fundamental
budgetary challenges.”

“Putting the federal budget on a sustainable path will require
significant changes in spending policies, tax policies or both,” he
said.

Elmendorf said the challenge of deficit reduction is made more
complicated by the weak American economy.

“Changes that might be made to federal spending or tax policies
could have a substantial impact on the pace of economic recovery during
the next few years as well as on the nation’s output and people’s income
over the longer-term,” he said.

Elmendorf said the recent financial crisis and recession “have cast
a long shadow on the U.S. economy,” adding that the “economic outlook
remains highly uncertain.”

Elmendorf did not offer any new deficit or economic assumptions.
The CBO released its mid-session report last month.

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 or Congress
rejects its plan, 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 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$,M$$CR$]