Cutting U.S. deficit now risks recovery, Orszag says

Reuters ^ | July 29 2010 | Reuters

[NoLibZone]

White House budget chief Peter Orszag said on Wednesday it would be "foolish" to cut the U.S. deficit while economic growth was still frail, but it would be equally foolish not to significantly curb the deficit by 2015.

Orszag told an audience at The Brookings Institution, a Washington think-tank, that failing to take real steps toward closing the record U.S. budget gap would do as much harm to the economy has choking off fiscal stimulus now.

It was his last public speech before stepping down as head of the White House Office of Management and Budget on Friday.

President Barack Obama, who has named OMB veteran Jack Lew to replace Orszag, has used deficit spending to help the U.S. economy recover from the worst recession in 70 years.

[NoLibZone]

Do other economists feel it’s possible to spend our way out of a recession?

[Brugmansian]

He's also taking on Paul Ryan. He will lose this debate. In fact, he already has. From the Daily Caller this morning:

On Wednesday, Orszag used the enlarged platform bestowed upon him in his last speech as a White House adviser to go after Ryan again, this time in more detail than ever before. As before, it was civil, but Orszag went to considerable lengths to argue that Ryan’s plan would not work.

Orszag’s criticism comes just days after Ryan himself delivered back to back speeches in Washington touting his plan. Ryan’s remarks at the Brookings Institution, a center-left think tank, drew attention when he called out his own party along with Democrats for letting political concerns crimp serious discussion of how to fix the nation’s debt and deficits.

The decision to so publicly elevate and critique Ryan shows both the seriousness with which Obama and his top advisers take Ryan’s alternative vision for the country’s future . . .

Read more: The Daily Caller: Peter Orszag versus Paul Ryan: Part Deux

[Southack]

The first time that a nation gets into a downturn, stimulus spending can work.

The problem, however, is that debt is cumulative. Once debt reaches a certain point, new stimulus spending can’t overcome the deflationary drag of the accumulated debt.

Of course, if you are in power at the moment, you want a quick fix...and the only quick fix to be seen is more stimulus spending because back in the day...it worked.

Japan found out that what worked when you had a small debt load fails to work once your debt becomes large, though.

Japan has been in a deflationary event since 1989. More than two decades of new Stimulus spending has failed to save Japan.

Could we see something similar here?

[DontTreadOnMe2009]

Stupid BS

[cranked]

Orszag is an idiot that should be fired with nearly every other member of this lamearse, idiot-ridden administration.....

[sportutegrl]

How many FReepers have children or grandchildren who will be entering the workforce in 2015? What about all those Journ-O-Listers who laughed when the Tea Party said we were spending our children’s money?

[Freedom_Is_Not_Free]

The Fed is out of bullets. We are screwed. What will happen will happen. Now it is just, do we have a deflationary depression or prolonged double-digit inflation. The US Government wants the prolonged double-digit inflation, becasue they believe they can stop it quickly the way Volker did. They want to crush the dollar enough to shrink all of our debts and raise asset prices, but not enough to make the world rebel against it as a reserve currency before they apply the brakes on inflation.

This has never worked in the history of man. We’ll see how it goes this time...