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Replacing Orszag
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Race
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| Contributor | Jason |
| Last Edited | Jason Jul 01, 2010 07:28pm |
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| Category | Speculative |
| News Date | Friday, July 2, 2010 05:35:00 AM UTC0:0 |
| Description | The Congressional Budget Office just confirmed what we already knew: the US fiscal deficit is on an unsustainable path. Budget policy over the next two years must start to change that course without withdrawing stimulus too soon. The task will be harder without Peter Orszag, director of the Office of Management and Budget, who is quitting this summer.
Mr Orszag, CBO director before joining Barack Obama’s administration, played a key role in both last year’s fiscal stimulus and healthcare reform. Recognising the centrality of health spending in the fiscal outlook, he pushed hard, though with only mixed success, for strong cost-control measures. These included a tax on expensive employer-provided health plans, delivery-system experiments, and a beefed-up commission to find savings in the Medicare programme for the elderly.
His successor will fail unless the focus on savings of that kind can be maintained and increased. In addition, even if all goes well on that front, taxes will have to rise once the recovery is secure.
The scale of the problem is daunting. The CBO, not given to alarmism, says in its new report that under business-as-usual assumptions, net public debt would rise from 62 per cent of gross domestic product this year to more than 100 per cent in 2025 and 185 per cent 10 years after that. As the office points out, the projections understate the severity of the long-term problem because they ignore many of the bad effects of rising debt – notably, lower growth and diminished flexibility in responding to the next crisis. |
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