Economist Peter Orszag Calls for Bold Steps
to Reign in Deficit

Orszag, former director of Office of Management and Budget, speaks as guest of Trinity’s Distinguished Lecture Series

By Russell Guerrero ’83

February 2011 — Although the economic recovery is well underway, economist Peter R. Orszag said another financial crisis could occur if the government does not confront the federal deficit. Orszag, the former director of the Office of Management and Budget under the Obama administration, spoke on “The Economic and Fiscal Outlook”  as part of Trinity University’s Distinguished Lecture Series  on Thursday, Feb. 24,  in Trinity’s Laurie Auditorium.

In the last year, there has been encouraging news for the economy, said Orszag, including:

Peter R. Orszag

• Export growth was up 10 percent.

• Equipment and software investment has risen 15 percent.

• Corporate profits are up 12 percent, the same percentage before the recession occurred.

Tempering this good news is the high unemployment rate, which continues to affect the momentum of the recovery. “We have to look at that to keep it from becoming a permanent problem,” said Orszag.

A larger threat to the economy is the federal deficit.  Even when the economy makes a full recovery, which is expected in the next five years, the percentage of the deficit that makes up the country’s gross domestic product (GDP) could be as high as five or six percent. Orszag warned that such a high percentage was unsustainable.

He further explained that making cuts to the federal budget would not be enough.  Even as Republicans and Democrats fight to trim money from the government, the most optimistic estimates show that the total would only be about half a percentage point.

“The hard truth that neither side wants to say is that ...we cannot get to where we need to be on the budget without raising taxes,” said Orszag.

Another threat looming on the horizon is the escalating cost of health care. Orszag said he would like to see a federal agency created that would be insulated from the politics of Congress, much like the Federal Reserve, that could regulate Medicaid and Medicare.

Orszag first touched on these themes during a student meeting earlier in the afternoon.  During an informal question and answer session with 25 economics majors,  he spoke on “the increase in toxicity in Washington, D. C.,” caused by cable news networks and partisan bloggers, which amplifies the polarization between Republicans and Democrats and slows the pace for change.

When asked how to end the infighting in Congress, Orszag said the responsibility goes back to the American people. “It’s not going to change unless we say it has to,” he said.

The Trinity University Distinguished Lecture Series is made possible by an endowment gift from Mr. and Mrs. Walter F. Brown of San Antonio.

© 2011 Trinity University