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Interview with OMB Director Orszag

Interview with OMB Director Orszag

The Situation Room - March 25, 2009

BLITZER: And joining us now from the White House, the budget director, Peter Orszag.

Peter, thanks for coming in.

PETER ORSZAG, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: It's a pleasure to be here.

BLITZER Judd Gregg had this fascinating chart that he released showing that between 1776 and 2008 -- 232 years of U.S. history -- the national debt became $5.8 trillion. And in the new budget -- the projected budget that the president wants to go for -- it would add another $8.7 trillion up the year 2016, for a federal debt of $14.5 trillion.

Are those numbers accurate?

ORSZAG Well, they are. But what they don't reflect is the mess that we are inheriting. And that without the policies the president has put forward, that those debt numbers would be $2 trillion higher.

So it's true. We are -- we have inherited a big fiscal mess. And it's going to take time to work our way out of that. But proposals that are being put forward reduce the deficit relative to the course that we're on.

And, unfortunately, the course that we're on involves significant increases in debt.

BLITZER He says this -- this budget proposal you have, if it goes forward as you would like, it's going to bring the country to bankruptcy.

ORSZAG Well, I think -- I saw some comments of his this morning suggesting that perhaps he's walking that back a bit. I don't -- I don't know that I would use that kind of language.

I think, look, what we face is a significant fiscal problem that we're inheriting. This budget is working that down. And in terms of our long-term fiscal future, health care is at the root of that. And that is why we want to get health care reform done this year.

BLITZER Even a lot of Democrats -- moderate Democrats in the Senate and the House -- they say the country simply can't afford what you're proposing. They're looking to scale back. And in terms of the Senate Democrats -- the moderate ones -- maybe by hundreds of billions of dollars over the next 10 years, what you have in mind.

You just came from the Hill with the president. You met with them.

How big of a problem do you have with those Democrats?

ORSZAG The president got a very warm response from the Senate Democrats. The chairman's mark that is being considered by the Senate Budget Committee today is fully in line with the four principals that the president has put forward -- cutting the deficit in half, investing in health care, investing in education and investing in clean energy.

I'm confident that what's coming -- that what will come out of the Senate is something that fulfills the budget priorities the president has put forward.

BLITZER But they don't want to go forward with making that middle class tax cut that you have for the next two years as part of the stimulus package. They don't want to make it permanent, because they say it's simply too expensive.

ORSZAG Well, again, we've gotten the four priorities that we identified. It was never going to be the case that we would just send up a budget and they would take absolutely everything in it.

But we do have the Making Work Pay tax credit in law for two years. And we've got two years to figure out how to finance its extension. That's why we're asking the Volcker board to take a close look at, for example, a tax gap -- $300 billion a year in taxes that are owed that are not collected that would more than pay for Making Work Pay.

BLITZER Most of the Republicans -- and, indeed, a bunch of Democrats, as well, say the country can't afford what you would like to do as far as carbon emissions are concerned -- to have the so-called "cap and trade" tax, if you will, making electricity -- gasoline even more expensive for American consumers. While worthwhile, it would simply be too expensive.

Are you ready to back away from that, as well?

ORSZAG Well, again, the key thing we want to do is reduce our dependence on foreign oil and move towards clean energy. I think what we're seeing emerge from the House and Senate on cap and trade, specifically, is perhaps moving that outside of the budget resolution process.

BLITZER So, in other words, not making it what you originally wanted, but you're ready to compromise on that?

ORSZAG Again, what we're -- what we -- what we're focused on is investing in clean energy and reducing dependence on foreign oil. And with regard to cap and trade, there are different ways for getting legislation done.

BLITZER Cap and trade, though, effectively, the Republicans say, would be a tax on gasoline, electricity and other forms of energy.

Is that right?

ORSZAG I wouldn't characterize it like that. There will be effects on energy prices. But again, global warming and global climate change are -- is one of the key threats facing our planet. And we will need to address it at some point.

BLITZER All right.

Let's talk about the CBO. You were once the director the Congressional Budget Office...

ORSZAG Yes. I know the former director well.

BLITZER And that would be you.

The -- they say that your assumptions in your bud -- 10-year budget are overly optimistic. They have a much more, what they call realistic -- lower expectations, as far as the assumptions are concerned. And, as a result, they think it would be an additional $2 trillion deficit over the next 10 years.

Are their assumptions -- and you know these professionals over there at the Congressional Budget Office -- are their assumptions more precise, more accurate than the White House assumptions?

ORSZAG Look, I have a lot of respect for the Congressional Budget Office. But if you look at the -- and there are legitimate technical disagreements.

If you focus on economic growth, which is a key driver of the overall budget deficit, in the -- out five years, in the back five years, they have a growth rate that declines to 2.2 percent a year. We're at 2.6 percent. The Federal Reserve is between 2.5 and 2.7. And the blue chip -- the private forecasters -- the consensus of private forecasters is at 2.6.

So we're right in line with those outside groups. The CBO is somewhat below it. And, you know, again, legitimate technical differences, but that's a key driver of those out year deficit differences.

BLITZER So you're still standing by your numbers?

ORSZAG Absolutely.

BLITZER Peter Orszag, thanks for coming in.

ORSZAG Thanks for having me.

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