Wednesday, June 23, 2010

Zig Orszag Adieu


Orszag Adieu

The 'cost curve' bent the budget director.

  • According to press reports, Peter Orszag has told friends that he plans to leave as White House budget director because he wants to go out on "a high note." Would that refer to the deficit, or federal spending as a share of GDP?

Mr. Orszag's 18 months on the job is typical for the head of the Office of Management and Budget, though few predecessors have had a gaudier tenure. Budget wonks always say they favor "fiscal responsibility," some more credibly than others. Yet Mr. Orszag did so while serving as an intellectual architect of the $862 billion stimulus, two budgets that boosted spending to levels unseen since World War II and ObamaCare (true costs to come, though conservatively in the range of $2.5 trillion).

Mr. Orszag's first budget proposed to bring federal spending to 27.7% of GDP, and it is projected by the Administration to remain above at least 22% for the next decade—up from the modern average of under 21%. The Congressional Budget Office's view of Mr. Orszag's budget puts the deficit at 4.3% of GDP in 2015—versus 2.6% in the baseline status quo—and then rising back to 5.6% in 2020.

Democrats on Capitol Hill and President Obama are doing most of this damage, but Mr. Orszag made one signature contribution—to wit, his claim that the only way to reduce entitlement spending was to create a new entitlement. Mr. Orszag's illusion that government can "bend the cost curve" enabled Democrats to nationalize more health-care spending while claiming to save money.

In a New England Journal of Medicine essay last week, Mr. Orszag wrote that ObamaCare "will significantly reduce costs" because "it institutes myriad elements that experts have long advocated as the foundation for effective cost control." But not according to CBO director Doug Elmendorf, who wrote recently that "Rising health costs will put tremendous pressure on the federal budget during the next few decades and beyond" and that "the health legislation enacted earlier this year does not substantially diminish that pressure."

Look for Mr. Orszag to nonetheless hit the lecture circuit as an apostle of fiscal rectitude, claiming that the only way to save America from budgetary ruin is—a tax increase. The media will treat him like a sage.


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