Reps. Ryan and Van Hollen

Rep. Paul Ryan, R-Wis., questioned Congressional Budget Office Director Doug Elmendorf about the necessity to reform Medicare so the nation’s budget can be sustainable, and Rep. Chris Van Hollen, D-Md., stressed the importance of increasing taxes to keep current health care programs. (Mattias Gugel/Medill)

WASHINGTON — Republicans and Democrats sparred Wednesday over a way to cure the economy at a House Budget Committee hearing after the head of the Congressional Budget Office said the country is on an “unsustainable fiscal course.”

Congressional Budget Office Director Doug Elmendorf appeared before the committee the day after his agency released a report on the outlook for the budget and the economy running up to 2022.

The CBO, a nonpartisan agency that provides economic and budgetary analysis to Congress forecasts that the federal deficit will remain over $1 trillion in 2012, the fourth consecutive year, if laws remain unchanged.

Elmendorf said Congress’ persistence in extending tax cuts and not addressing large changes to health care programs is putting the country on an “unsustainable fiscal course.”

Chairman Paul Ryan, R-Wis., questioned Elmendorf about what impact reining in Medicare would have on the economy and debt.

Elmendorf said Congress could address government-provided health care programs to reduce the debt, mainly because of the aging population and rising health care costs. He said this could be done using a combination of increasing revenues through the expiration of current tax cuts and reforming Social Security, Medicare and Medicaid.

Ryan insisted Medicare must be reformed in any real attempt to make the economy sustainable. He cited numbers from the CBO’s summer budget outlook that show spending on only health care programs and its interest will exceed all federal revenues by 2034.

Congressional Budget Office Director Doug Elmendorf said, "The economy was only about halfway through the cumulative shortfall in total output that will result from the recession and its aftermath" at a House Budget Committee hearing Wednesday. (Mattias Gugel/Medill)

“We can’t be a government that only provides health care benefits,” Ryan said. “We have national defense. We have education concerns. We have environmental concerns. We have Social Security.”

Maryland Rep. Chris Van Hollen, the ranking Democrat, said allowing the Bush administration tax cuts to expire would be good for the economy.

Van Hollen stressed that the economy is slowly improving under the Obama administration. He referenced CBO projections that show yearly deficits should decline under current law to an average of 1.5 percent of GDP and unemployment should reach levels under 5 percent within the decade.

The CBO’s report, which Ryan called “bleak,” said the economy will likely continue to grow at a “sluggish pace over the next two years,” as real GDP should increase by only 2 percent this year and just more than 1 percent next year. The agency also expects that the unemployment rate will stay above seven percent until 2015.

Senate Budget Committee Chairman Kent Conrad, D-N.D, wrote in a statement Tuesday that the CBO’s report shows how vital it is that the payroll tax cut and unemployment benefits are extended through the end of the year.

“Failing to extend these critical measures would add further drag to the economy and jeopardize the gains we have already made,” he said.

Elmendorf said tax increases are a large reason deficits decrease to reasonable levels over the next decade, but he added that a payroll tax cut would have a stronger simulative effect for the short-term economy than the broad-based Bush tax cuts.

Ryan pointed out that the Republican-controlled House has passed a budget to try to solve the economic problems. He criticized the president and Senate Democrats for not presenting a legitimate solution.

“It is not simply enough to oppose,” the Wisconsin lawmaker said. “We need to propose real solutions instead of resorting to the same old false attacks.”