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Interview with OMB Director Peter Orszag

Interview with OMB Director Peter Orszag

By The Situation Room - November 12, 2009

WOLF BLITZER: Let's discuss this and more with Peter Orszag. He's the director of the Office of Management and Budget.

Thanks very much for coming in, Peter.

PETER ORSZAG, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: Good to be here, Wolf.

BLITZER: Trillion-dollar plus deficits as far as the eye can see? That's going to cause enormous long-term damage to average folks. Explain why you're so concerned about these enormous deficits.

ORSZAG: Well, we first have to explain that right now, the deficit is actually, ironically, helping the economy. The tax relief and additional spending helps to bolster demand when the economy is very weak.

The problem is at some point, whether it's in 2011 or 2012 or 2013, the situation starts to reverse. And at that point, deficits crowd out private investment and become a harm. We need to get ahead of that problem, and that's the line we're trying to walk in the budget that we're putting together for next February.

BLITZER: Because so much U.S. taxpayer dollars already is being spent simply to finance, to pay the interest on those loans we're getting on the T-bills we're selling to China or Saudi Arabia or other countries that are helping to finance this deficit budget.

ORSZAG: That's correct, although we need to remember, we're in an exceptional time right now. Total borrowing has imploded. Private borrowing has collapsed. And, in effect, the Treasury Department is the last borrower left standing. So, for right now, long-term interest rates are very low, but we need to get ahead of the problem because, as private borrowing starts to tick up, that situation's going to change.

BLITZER: How worried are you that some of these foreign creditors of ours are going to lose confidence in the dollar and they're going to, for example, start buying gold as a hedge -- India, for example, has recently done that -- and that the value of the dollar will go down as a result?

ORSZAG: Well, I'm going to leave comments about the dollar to our Treasury secretary. But again, if you look at the interest rate on our long-term government bonds, right now the 10-year bond is -- has a yield, an interest rate of under four percent. It's very low. And that's because we're in such an exceptional period.

That is going to change at some point. And we need to act before that happens.

BLITZER: One way of dealing with these budget deficits is to raise taxes. Is that right?

ORSZAG: Well, a deficit reflects an imbalance between spending and revenue, and so narrowing it requires acting on one, the other or both.

BLITZER: So when does that go into effect? The president said repeatedly during the campaign he wants to increase taxes for those making more than $250,000 a year. When will that go into effect?

ORSZAG: Well, under the budget that we put out this year, that would go into effect at the beginning of 2011. But again, above $250,000. So for a very small share of American taxpayers.

BLITZER: We got a question on Twitter, from someone who asked us this question -- Mac1014, he says, "Ways when in our history has raising taxes produced private sector jobs?"

ORSZAG: Well, I think what we need to remember is that budget deficits can impede economic activity. If you look back during the 1990s, for example, in 1993 there was a very significant effort to reduce the budget deficit, including through some revenue increases. The result was a very robust period of economic growth throughout the 1990s. And as we look past this immediate crisis and look to the future, we need to put the nation back on a sounder fiscal course, again, to build a stable economic foundation.

BLITZER: And when you say revenue -- what was the phrase you used, revenue enhancers? What?

ORSZAG: Revenue increases.

BLITZER: Revenue increases. You mean tax increases, right?

ORSZAG: That would be another way of putting the point, yes, Wolf.

BLITZER: OK. I just want to make a fine point on that.

Here's some numbers from our recent CNN/Opinion Research Corporation poll. "Do you approve of how President Obama is handling unemployment?" He's proposed a jobs summit next month -- or a jobs forum he's calling it.

Forty-seven percent say they now approve of how he's handling it. But in March it was 64 percent.

Jobs, jobs, jobs. Here's the question. You've got this forum coming up next month, in December. What's taking so long? Because the jobs have been a critical issue all these 10 months that he's been in office.

ORSZAG: Well, I think what we're seeing is the jobs market is still unacceptably weak. The unemployment rate is still too high. But what's happened is at least we've gotten some economic growing again.

In fact, if you went back a year, November 2008, and anyone told that real GDP growth in the third quarter this year was going to be 3.5 percent, I think they would have been quite surprised. So we're getting some economic growth, but that needs to now translate into job growth. And we're focused on that process.

BLITZER: How worried are you that the trillion-dollar-plus price tag for health care reform will convince some moderate Democrats, for example, in the Senate not to support it?

ORSZAG: Well, I think what we're seeing, again, in the Senate legislation, you have a deficit-reducing package that not only reduces the deficit over the first decade of its existence...

BLITZER: I'm talking about the House package.

ORSZAG: Well, again, in the House bill it also does reduce the deficit over the first decade. It reduces the deficit thereafter, too, and includes some important reforms to how health care's practiced in the United States. As the debate shifts to the Senate, I think you're going to see, again, attention focused on those cost containment provisions which are solid.

BLITZER: Peter Orszag is the White House budget director.

Good luck.

ORSZAG: Thank you very much.

BLITZER: You're dealing with all of our money. We hope you do well. Thank you.

ORSZAG: Thanks, Wolf.

 

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