At the end of a week that included both a heart-stopping plunge in the stock market and good news about jobs, White House Budget Director Peter Orszag was keeping his cool.
"It’s much too soon to be making market extrapolations" about the deepening fear in financial markets, Orszag explained last Friday referring to fallout from the Greek crisis. In an interview at his office in the Eisenhower Executive Office Building next door to the White House, Orszag talked about the latest developments in Greece and Europe, the dramatic glitch in the U.S. stock market, and the new employment numbers released on the same day. He acknowledged that investors were on high alert. And he was pleased that the nation added an unexpectedly high 290,000 jobs in April, according to Labor Department statistics.
But neither of those developments were enough to justify a re-think of the White House’s budget assumptions in either direction. Nor does the administration have any plans for another major economic stimulus package, beyond measures to extend unemployment insurance, target job creation and renew a raft of tax incentives. "It’s well known that there [are] significant uncertainties surrounding any set of budget projections,’’ he said. "I think it would be a mistake to take high-frequency changes and extrapolate them out, but there is a lot of uncertainty, and one of the factors is financial markets."
Have the uncertainties increased? "The way I would put it is that there always seems to be more uncertainty surrounding turning points, and economists are not good at predicting exact turning points."
"We shouldn’t make too much about a month to month movement (on job creation), I would rather have it be a pleasant surprise…."
During a wide-ranging interview, Orszag noted that corporate executives have become far more optimistic about the economy in recent months, though he didn’t revise the administration’s projection that unemployment will remain well above 9 percent through the November mid-term election.
And while he reiterated President Obama’s strong support for the newly created bipartisan deficit-reduction commission, he carefully stopped short of saying the president would automatically embrace its recommendations – if there are any. Orszag was careful not to speculate on whether Obama would go along with a commission proposal to raise taxes on families making no more than $250,000 a year – a move he pledged he would not do.
On a question that has preoccupied some Washington gossips in recent weeks – will Orszag step down as budget director any time soon? Acquaintances say he is saying he has "no plans to leave now."
"Look, I spend a lot of my time talking to CEOs, the folks who are hiring. The degree of optimism at the CEO level over the past three or four months has increased markedly,"
At 41, Orszag is one of the youngest White House budget directors since David Stockman held the job in President Ronald Reagan’s first term. He is a respected expert on long-term fiscal problems, and co-authored a book that outlines a middle-of-the-road approach to stabilizing Social Security. As director of the Congressional Budget Office from January 2007 to November 2008, he beefed up the agencies staffing on health care costs.
But the job of White House budget director is one of the most grueling posts in Washington, and Orszag, who is engaged to marry ABC News reporter Bianna Golodryga, is rumored to be eager for a slower work pace. Dressed in a royal-blue button-down shirt, Orszag was concise but often guarded in his comments.
"The stimulus has "kinda, sorta been working"
Despite pressure from some quarters of the Democratic Party to do more to reduce unemployment, which edged up to 9.9 percent in April, Orszag said the administration supports only small additions to the existing stimulus programs – extra money to prevent teacher layoffs; extended unemployment and health insurance benefits.
The president’s $787 billion economic 2009 stimulus program has "kinda, sorta been working’’ and has played a substantial role in turning around the economy, Orszag said. "Look, I spend a lot of my time talking to CEOs, the folks who are hiring. The degree of optimism at the CEO level over the past three or four months has increased markedly,’’ he said. "If you took a sample of CEO’s three or four months ago and asked how many were hiring, a very small minority would have responded positively and now the share is much higher."
Orszag said questions about another possible financial crisis leading to a double dip recession were strictly "hypotheticals." But, he added: "If we have to respond, we will.’’ For the moment, he said, the administration already has a "placeholder’’ in its budget for an additional $100 billion for safety-net programs and limited extra assistance for state budgets.
Orszag raised eyebrows last week when he spoke at a dinner on Capitol Hill and suggested that the president’s newly-launched fiscal commission might achieve success even if the requisite 14 out of 18 members couldn’t reach agreement on a set of proposals. An alternative, he suggested, would be to simply have the Republican and Democratic co-chairs hammer out their own recommendations. On Friday, Orzsag confirmed that there were precedents for such an outcome and said it could still be useful.
"Look, I think the objective should be to get a majority report," he said Friday. "But there are a variety of ways of making commissions successful, which I think, by the way, is the history of commissions—that they often become successful after some twists and turns. And I would imagine that there will be some twists and turns on this commission too, but again we remain hopeful that in the end it will be successful, one way or another."
"The fact that he wants to give the commission running room does not mean that that any proposal that came out of the commission would also meet with the president’s approval."
But the Obama administration could face an even more difficult decision if the deficit commission does agree on proposals. Obama has vowed not to raise taxes "one dime’’ for individuals earning less than $200,000 a year or households with incomes below $250,000. But budget experts say that promise will be extremely difficult to keep if the government hopes to bring the deficit down substantially by 2015.
The president has insisted that the deficit commission should consider all proposals – including tax increases for people earning less than $200,000 – as "on the table.’’ But Orszag stopped short of saying the president would actually support such tax increases if the commission actually recommended them.
"He wants to give the commission the room to run and to figure out what it believes is correct,’’ he said. But, he added in the same breath, "The fact that he wants to give the commission running room does not mean that that any proposal that came out of the commission would also meet with the president’s approval."
Most experts say the odds are low that the deficit commission will actually agree on any recommendations, because Republican lawmakers on the panel are expected to fight any tax increases, and they have enough votes to block them.
That may be fine for the moment. Orszag strongly suggested that the White House wants to stay out of such debates for the time being.