Orszag warns against slashing deficit too quickly
By Nicholas Johnston
(Bloomberg) -- Peter Orszag, giving his last speech as White House budget director on Wednesday, defended the administration's economic policies and said it would be "foolish" to try to slash the deficit before the recovery takes hold.
Orszag, who is leaving his post at the end of the week, said the measures taken to try to stem the worst recession in more than 70 years, including the $862 billion stimulus, helped boost U.S. economic growth and reduced job losses.
While the government must address the nation's long-term debt, "it would be foolish to dramatically reduce the deficit immediately" because that would choke off the recovery, Orszag said in an address at the Brookings Institution in Washington. "The right combination is more fiscal discipline in the medium- and long-term, and more support for the economy in the short term, and both sides need to acknowledge that."
The White House Office of Management and Budget said in a July 23 budget update that the federal deficit will be a record $1.47 trillion this year, or 10 percent of the gross domestic product, and $1.42 trillion next year.
Orszag said the administration has taken steps to deal with the deficit in coming years, including a three-year freeze on discretionary non-defense spending, cuts in unnecessary programs and an overhaul of the U.S. health-care system. The health-care plan, which President Obama signed into law in March, is crucial to deficit reduction because it will trim the rising costs for medical treatment, Orszag said.
The growing cost of health care is the "single greatest driver of our long-term deficits," he said.
Orszag said the recommendations from Obama's 18-member deficit commission also will be key to getting the budget under control. The commission, scheduled to give its report in December, is looking at ways to curb deficits to about 3 percent of the GDP by 2015, a level most economists say is sustainable.
July 28, 2010; 12:19 PM ET
Categories: Budget and fiscal policy , U.S. Economy
Save & Share: Previous: Morning briefing: Talks between Greece, striking fuel-tanker drivers collapse
Next: Beige book: Recovery continues, but unevenly
Posted by: Anonymous | July 28, 2010 1:53 PM | Report abuse
Posted by: dnjake | July 28, 2010 5:12 PM | Report abuse
Posted by: Anonymous | August 1, 2010 2:27 PM | Report abuse
The comments to this entry are closed.