Possibilities and Perils: The Future of Economic Policy (Peter Orszag)
IN THE WAKE OF THE FINANCIAL CRISIS, Great Recession and sluggish recovery, good federal policy can help rebuild the American economy and make it both more stable and equitable. Misguided policy could take the nation down a very different road. In an era of divided government and political brinksmanship, many sensible policies don’t get the public airing they deserve – much less the legislative action we desperately need. Peter Orszag, Citigroup Vice Chairman of Corporate and Investment Banking and the former head of the Office of Budget and Management, discusses the options facing economic policy makers.
“The negotiations are about more than taxes. There is also the debt limit, which, according to the best guesses of both the Congressional Budget Office and the Bipartisan Policy Center, will be reached in the first quarter of 2013.
So the question for the Democrats is: Even if you win higher marginal tax rates, how do you plan to get the debt limit increased? The Republicans, after all, could cave on raising taxes but still be unwilling to include a debt-limit increase in the agreement, absent any changes to entitlements. In that case, the fiscal-cliff victory would be Pyrrhic, with another crisis arriving in February or March.
In any case, Democrats should affirmatively want entitlement reform that is progressive and puts the crucial programs on a sounder footing.
On Social Security, the Democrats, while they still control the White House and the Senate, should want to lock in the victory they have already won over the idea of keeping private accounts out of Social Security. Plus, as Peter Diamond and I have laid out, it’s possible to restore the program’s long-term solvency while also making it fairer -- including by having it reflect the growing gap in life expectancy by income and education. Finally, and perhaps most important, Social Security reform can be phased in gradually, thereby minimizing the damage to the labor market from too much austerity too soon.”
– from “A Good Deal Will Raise Tax Rates, Fix Entitlements,” which appeared December 4, 2012 on Bloomberg View.
Peter Orszag is an American economist, currently serving as Vice Chairman of Corporate and Investment Banking at Citigroup. He also writes a bimonthly column for Bloomberg View, covering such topics such as bipartisanship, the American class divide, unemployment, and other economic issues. Orszag is currently an adjunct senior fellow at the Council on Foreign Relations. He resides and works in New York City. Prior to becoming Vice Chairman of Global Banking at Citigroup, Peter Orszag served as the 37th Director of the Office of Management and Budget (OMB) under President Barack Obama, who nominated him to the position. He served as the Director from November 2008 through August 2010, after which he took his current position. Orszag also served as the Director of the Congressional Budget Office (CBO) from January 2007 until November of 2008. From 2001-2007, Orszag was a senior fellow at the Brookings Institution, where he headed the Hamilton Project and the Retirement Security Project. He was a lecturer at UC Berkeley in macroeconomics in 1999 and 2000. Before this, he worked in the Clinton administration as Senior Economist and Senior Adviser on the Council of Economic Advisers in 1995 and 1996, and as Special Assistant to the President for Economic Policy in 1997 and 1998. Orszag has also been a columnist for the New York Times, writing about the deficit, Social Security, health care, and other topics.