Not sure there was any news. Orszag did acknowledge that the U.S. “fiscal trajectory” was unsustainable, but argued that it’s “a myth” that “somehow the Obama Administration has overseen a massive increase in spending that is the cause of our long-term and medium-term fiscal problems.”
The deficits are rather largely the result of the recession — projected before the Obama Administration took office — Bush tax cuts of 2001 and 2003, and the Medicare prescription drug benefit, none of which was “paid for,” Orszag contended.
The situation requires a three-fold response, he said.
The first core principle is to reinstate the Pay As You Go principle. Any new spending or any new tax cut must be offset by corresponding changes somewhere else in the budget so that we don’t make the situation worse. That is what is now embodied in law because the Congress passed and the President signed a statutory Pay As You Go law that requires those actions for any new policies.
The trouble is, Congress is always finding ways to circumvent PayGo. A current point of dispute in the Senate is whether the extension of unemployment benefits and COBRA subsidies would be “paid for” by spending reductions elsewhere; the bill was declared an “emergency,” so it’s not offset. Just more spending and debt.
Orszag said the other two strategies for tackling the deficits were to cut budgets — as the Obama Administration has done — and develop a long-term plan through the work of the Deficit Commission led by Alan Simpson and Erskine Bowles.
The OMB Director also spoke about elevating higher education as a federal priority, an issue the manufacturing audience appreciated.
We have two soundfiles:
UPDATE (3:53 p.m.): We forgot the key paragraph from his speech:
There’s been a lot of confusion and, I think, misinformation put forward, so I want to be very clear. I strongly support and join Chairman Bernanke in noting that we are on an unsustainable fiscal course. The key question is what we do about it, and we need to be very clear about what causes that fiscal gap over the medium and long term before we can be realistic about how we address it.
The Wall Street Journal’s reporter also identified Orszag’s comments about the fiscal trajectory as the news: “Orszag Tells Manufacturers US On ‘Unsustainable Fiscal Course’”
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