All sides in the budget negotiations agreed Wednesday that the federal fiscal picture is grim, but the Congressional Budget Office director told lawmakers not to let big fights over taxes and spending get in the way of a short-term fix.
"Big steps are better than small steps, but small steps are better than no steps at all," Douglas Elmendorf said.
Mr. Elmendorf was briefing negotiators who are working to write a 2014 federal budget, saying the fiscal picture is still "unsustainable."
Though he encouraged a short-term solution over doing nothing, he left no question that long-term reforms are needed eventually, especially to manage Social Security and Medicaid costs. Congress will have three choices, he said: cut those entitlements, increase revenue or cut other programs.
"You don't have a choice about doing at least one of those things. You can do one or two or three if you choose to, but at least one of those things will have to change," he said.
The House and Senate negotiators are racing a mid-December deadline for writing a final budget blueprint, which would give the spending committees about a month to write individual appropriations bills. The government is running on stopgap money right now, but that expires Jan. 15.
Republicans have ruled out big tax increases, while Democrats have said they won't accept major cuts to Social Security or other entitlements, leaving lawmakers chiefly to fiddle with the automatic sequester budget cuts, which are due to hit again in January.
Mr. Elmendorf said tax increases and spending cuts — the most "abrupt fiscal tightening" since World War II — have helped cut the deficit dramatically, but that they also have harmed the economy.
"Our analysis indicates it has also slowed economic growth in the past few years," Mr. Elmendorf said.
Despite this, Sen. Chuck Grassley said sequestration is working. He urged the committee to focus on economic growth and job creation, not military strength.
"I hope we keep in mind that the economic strength of our country is a necessary precondition to our military strength," the Iowa Republican said. "Without economic strength, there won't be any national security. Compromising on the sequester for more money for the military I think is short-sighted."
Mr. Elmendorf's overview of the economic state of the country was discouraging, but Sen. Patty Murray, Washington Democrat and chairwoman of the Senate Budget Committee, said she is "very encouraged" by conversations with Rep. Paul Ryan, chairman of the House Budget Committee, that they can reach a final deal.
"I'm hoping we'll get to a bipartisan compromise very soon," she said in the meeting.
However, lawmakers continued to keep expectations for a large deal very low.
"I think we can reach an agreement, though I'm not sure how large it's going to be," said Rep. Tom Price, Georgia Republican. "I think we need to walk before we can run."
The CBO released a report Wednesday afternoon detailing the budgetary effects of more than 100 options that would decrease spending or increase revenue. While the report does not evaluate which would be best, it does lay out the consequences of each option, including how much it would save the government over the next 10 years.
Options range from Social Security reforms to increasing taxes on cigarettes to canceling the Navy's plans to acquire more ballistic-missile submarines. Some that would save the most include reducing the size of the military, which would save $495 billion, and imposing a $25 tax per metric ton on greenhouse gases, which would save more than $1 trillion over 10 years.
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