Congressional Budget Office Director Douglas Elmendorf said Tuesday that it would be much better for the economy if the sequester were replaced with phased-in deficit reduction, and that investments in infrastructure can provide a real boost to economic activity.

He also told members of the Senate Budget Committee during a hearing on CBO’s recently released annual Budget and Economic Outlook, that “the ongoing uncertainly about federal budget policy represents a drag on spending and thus on incomes and jobs,” but that CBO does not how to quantify that effect.

Elmendorf made his remarks as Democrats and Republicans sparred over which party is responsible for the current budget deficit and whether spending cuts or a mix of those and new tax revenues would be the best way to reduce it.

He told committee members that under current tax law, inflation-adjusted gross domestic product will increase about 1.5% this year, but that it would rise roughly 1.5 percentage points faster were it not for fiscal tightening.

“The sequester itself, we think, represents about 0.6% of GDP growth this year, and would mean a difference of roughly 750,000 jobs by the fourth quarter of this year,” he said.

Committee Chairman Sen. Patty Murray, D-Wash., asked the CBO director if it wouldn’t be preferable to replace the sequester “with a package of savings that is better targeted” rather than across-the-board, on a phased-in basis “so that it occurs when the economy is on a stronger footing.”

“Yes,” Elmendorf said. “If the sequester were replaced with a comparable amount of deficit reduction that were phased in more gradually, that would be better for the economy in the near-term.”

Murray also asked him about a package of spending cuts and new revenues.

“The composition of that fiscal tightening, I think, can affect the economy,” he said, but cautioned that CBO doesn’t make policy recommendations.

Later, Sen. Tammy Baldwin, D-Wis., asked Elmendorf in investments in infrastructure is one of the best ways to increase growth.

“Yes,” he said, adding that if they are “done in an intelligent manner” they “can provide a real boost to economic activity, not just today when the investments are occurring, but over time, as the investments yield returns.”

Sen. Jeff Sessions from Alabama, the top Republican on the committee, said spending cuts will best accomplish deficit reduction and told Murray that her recent remarks about Republicans being committed to “‘protecting the rich above all else’ .... hurts my feelings. That’s not what I believe in.”

“We need to help poor people get jobs and move forward with their lives, not be dependent ... more and more on government checks, handouts and programs,” he said.

Sessions also argued against tax cuts, saying, “We’ve just had a $616 billion tax increase averaging about $60 billion a year extra income, and we’re having a recovery from the recession, the slowest in a decade, but some recovery.”

Sessions worried about the nation’s rising debt and interest payments, warning they “help no one build nothing” and “will crowd spending on the rest of the budget.”

CBO is projecting that debt held by the public will reach 76% of GDP this year, the largest percentage since 1950. Under current laws, the debt would rise to 77% of GDP in 2023, far higher than the 39% average seen over the past 40 years, and it would be on an upward path, Elmendorf told committee members.

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