Peter Orszag, the bizarro David Stockman

June 22, 2010

Peter Orszag never really seemed to want the job as President Barack Obama’s budget chief. His successor should be just as reluctant, having to deal with the fiscal aftermath of the stimulus and healthcare plans.

But there is little doubt Orszag will depart as the most consequential Office of Management and Budget director since the notorious David Stockman nearly torpedoed Reaganomics in the early 1980s by calling supply-side economics a sham. In hindsight, of course, Reaganomics looks pretty good, including 17 million net new jobs and a collapse in inflation.

But Orszag was no whistle-blower of some perceived fiscal sleight-of-hand. Instead, it was just the opposite. He was a facilitator and enabler, providing the intellectual firepower and energy behind Obama’s drive for healthcare reform. Orszag made the case to the president that reducing healthcare costs was an important element to slashing the long-term budget deficit. More importantly, he persuaded Obama the U.S. healthcare system was so inefficient, overall spending could be restrained while also providing near-universal health insurance coverage. In effect, “bending the curve” was a free lunch. Or at least close enough for government work.

It was an audacious claim, mostly based on a single controversial academic study. Republicans never bought into the theory, and neither did Orszag’s successor at the Congressional Budget Office, Uncle Sam’s fiscal scorekeeper. In the end, Obama was forced to cut future Medicare spending and raise taxes to make the numbers balance out — at least on paper. Few Washington observers think those cuts will happen, meaning that the budget deficit could explode if Orszag’s novel theories don’t pan out. And even if the cuts occur, many budget hawks were counting on them to make Medicare sustainable over the long-term, not create a new entitlement.

Too bad Orszag didn’t use his considerable political skills – Larry Summers was supposedly warned to be careful of the guy “wearing the cowboy boots and bad toupee” – to make the case for entitlement reform first. In that regard, Orszag’s legacy is uncertain at best.

The next head of OMB will need 24-carat credibility and authority. The president’s confidence won’t be enough. A potentially more Republican Congress will be needed to pass any fiscal austerity reforms recommended by Obama’s deficit panel. And voters will need to understand those painful fixes, while U.S. bond and currency investors will need to believe they’ll really happen.

One option would be a disciple of Bill Clinton, the last president to balance the budget. A bolder choice would be David Walker, the government’s former chief auditor. He now runs a foundation created by Blackstone Group co-founder Peter Peterson devoted to fiscal sustainability issues. Walker is a fire-and-brimstone preacher on the deficit, albeit one with a penchant for folksy aphorisms. He could both crunch the numbers and communicate them. But given the magnitude of the challenge, getting him might take some convincing.

3 comments

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I couldn’t agree more with the writer. Not only would Dave Walker be a BOLD choice, he would be a politically savvy choice.
Walker has the experience, the smarts and the drive to make a much needed difference at OMB.
Furthermore, he has been pounding the table (and traveling the country)on this issue since at least 2005 but always as an Independent, looking for bipartisan input and solutions. Our country has never needed this more.
President Obama is a bold leader and my money is on him to at least try to get Walker to consider to take on this formidable challenge. He’s the right guy at the right time.

Posted by SensibleCenter | Report as abusive

[...] James Pethokoukis: But there is little doubt Orszag will depart as the most consequential Office of Management and Budget director since the notorious David Stockman nearly torpedoed Reaganomics in the early 1980s by calling supply-side economics a sham. In hindsight, of course, Reaganomics looks pretty good, including 17 million net new jobs and a collapse in inflation. [...]

Republicans measure everything by the fail trickle down Reaganomics! Obama’s problem is that he is headed down primrose path adopting too much of the same crap that got us into this mess!

Obama should make the banks absorb this crisis! The RECONCILIATION PROCEDURE should be used to do it quickly since matters of the budget is why it exist!

THE BANKS BOUGHT INTO WALL STREET SCAMS AND THE BANKS, IF NO ONE ELSE, SHOULD HAVE STOPPED IT BECAUSE THE RISKS SHOULD HAVE BEEN THOROUGHLY INVESTIGATED AND CALCULATED, THE WAY BANKS NORMALLY OPERATE! That’s why I believe the banks, Wall Street, AIG, and Bush collaborated to push a lot of money into circulation, causing inflation while raising tax revenue to pay for the wars! Must have been intended for the least able pay for wars FROM JUMP! Changed bankruptcy laws to do it!

The banks made the bad loans that caused the burden and the banks should bear that burden! Obama could turn this mess around overnight by the proper means IN HIS POWER TO DO IN WEEKS, NOT MONTHS OR CERTAINLY, NOT YEARS!

OBAMA USED THE RECONCILIATION PROCEDURE TO QUICKLY PASS HEALTH CARE AND SHOULD DO THE SAME TO SHIFT THE BURDEN OF THE CRISIS FROM THE PEOPLE TO THE BANKS!

The banks are the most able to bear the burden, especially if the people get their debt lifted and HUGE SPENDING BEGINS WHICH IS THE RESULTS! Then the banks have no excuse for not making loans! Right now money is going into the wrong pockets which is credit card payments to the banks instead of spending in the economy to lift businesses to generate jobs! Banks are sitting on the money and giving CEO’s big bonuses!

My solution doesn’t even require you to get out of stupid costly wars, or pushing for education, and trade policies to make a quick recovery within weeks! Getting out of stupid costly wars, pushing for education, and trade policies are the things that would surely improve upon THE POWERFUL IMPACT OF MY SOLUTION!

JUST SHIFTING THE BURDEN OF PUBLIC DEBT TO THE BANKS POPS THE TOP OFF THE UNEMPLOYMENT PROBLEM OVERNIGHT, PUSHING THE UNEMPLOYMENT RATE DOWN BELOW 5% IN LESS THAN A MONTH!

OBAMA’S DOING IT ASS BACKWARD LIKE A REPUBLICAN! HE’S GOT THE PUBLIC PAYING FOR THE SCREW-UPS AND SCAMS OF THE BANKS! HE AIDING AND ABETTING A SYSTEM OF WELFARE FOR THE RICH! HE’S PROPPING UP PRICES INSTEAD OF LETTING THEM FALL QUICKLY AS POSSIBLE SO ADJUSTMENT OCCUR AND WE ARE QUICKLY ON THE ROAD TO RECOVERY! IT’LL CAUSE SHORT TERM PAIN BUT IS BETTER THAN THE LONG TERM TORTURE OBAMA IS SERVING UP! HELP OBAMA BY GIVING IT TO HIM STRAIGHT!

I’M NO MOSES, BUT IF I WERE, THE WORD WOULD BE TO TELL OBAMA TO LET OUR PEOPLE GO! STOP EXPECTING US TO MAKE BRICKS WITHOUT STRAW(JOBS)!

NO SPENDING, NO BANK LOANS, NO JOBS, NATIONAL DEBT INCREASES, HYPERINFLATION ENSUES, AND CHAOS FOLLOWS!

OBAMANOMICS IS A LOOOOOOOOOOOOOOOSER!

Posted by Icu_dude | Report as abusive

[...] Reckless" Paulson – Business Insider The Ghost of David Stockman | Power Line James Pethokoukis | Analysis & Opinion | Reuters.com Excerpt: But there is little doubt Orszag will depart as the most consequential Office of [...]

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