White House Budget Director Says Economy Is 'Weak'

March 9, 2009 - 5:16 AM
Peter Orszag, the nation's budget director, says the $787 billion stimulus package should have a chance to work before officials ask Congress to consider a sequel. "Let's see what happens, let it work. We'll have a mid-session review later in the year. We'll have an opportunity to revise the assumptions at that point," Orszag said.

In this photo provided by CBS, White House OMB Director Peter Orszag appears on CBS's

Washington (AP) - The White House's top budget official declared on Sunday that "fundamentally, the economy is weak" while saying the administration's own financial predictions could need a revision by midyear.
 
Peter Orszag, President Barack Obama's Office of Management and Budget director, said in television interviews that the economic downturn has been years in the making but cautioned that the new administration wasn't yet looking at a second economic stimulus package.
 
Orszag said the already-in-place $787 billion stimulus should have a chance to work before officials ask Congress to consider a sequel.
 
"I don't think we should be chasing our tail, constantly revising assumptions," Orszag said. "Let's see what happens, let it work. We'll have a mid-session review later in the year. We'll have an opportunity to revise the assumptions at that point."
 
That revision, though, seemed unavoidable.
 
Obama's budget assumes the economy will grow at about 3.2 percent. Given climbing unemployment, shrinking credit and a general frustration over a crumbling economy, that now seems unrealistic.
 
Orszag acknowledged the federal budget is "uglier than we would like," but he blamed most of the spending on last year's budget process and defended Obama's decision to go forward with it without seeking more changes.
 
"This is like your relief pitcher coming in into the ninth inning and wanting to redo the whole game," he said. "Next year, we will be the starting pitcher and the game is going to be completely different."
 
The $410 billion spending bill includes the kinds of lawmakers' pet projects that Obama pledged as a candidate to eliminate. His top aides say Obama would overlook for now the time-tested tradition that allows lawmakers to divert millions at a time to pet projects, called "earmarks," in the hopes of moving on.
 
The measure expected to be voted on by the Senate this week keeps the government open for business through Sept. 30, when the federal budget year ends. Taxpayers for Common Sense, a watchdog group, identified almost 8,600 earmarks totaling $7.7 billion; Democrats say the number is $3.8 billion and that just under half of the projects come from GOP lawmakers.
 
Orszag also pleaded for patience as the 6-week-old administration looks for solutions: "Well, I think fundamentally, the economy is weak. Job losses began in January of 2008. The stock market started declining October 2007. This has been, you know, eight years in the making, and again, it's going to take some time to work our way out of it."
 
Republicans weren't swayed by Orszag's arguments, saying the Democratic spending bill doesn't address the problems or keep Obama's campaign pledges.
 
"First of all, if you make a promise, people expect that you live up to it. And that's why this administration's refusal to go in and change this bill, I think, is a false position," said Rep. Eric Cantor, the GOP's No. 2 official.
 
"There is no way anyone could take what Mr. Orszag has said with any credibility," Cantor said. "Of course they're negotiating on this bill in the Senate right now. To say that 'we would have drawn it differently' but leave $430 billion-plus dollars on the table like this? No way."
 
Republican leader John Boehner of Ohio tried to remain civil in his opposition.
 
"Listen, I want to work with the president on behalf of the American people," Boehner said. "That's what they sent us to Washington to do. And while I like the president as much as the American people do -- I think he's a great guy -- there are serious differences in terms of the approach that he would like to take and the approach that I think many Republicans would like to take."
 
Boehner said it's unacceptable that taxpayers would subsidize mortgages under Obama's plan, which aims to slow foreclosure rates and stem plummeting home values as neighborhoods spout "for sale" signs.
 
Other Republicans also criticized the administration's approach. Sen. John McCain, R-Ariz., said officials have erred in not dealing more specifically -- and harshly -- with banks and the lending crisis.
 
"I don't think they've made the tough decisions. Some of these banks have to fail," McCain said.
 
Sen. Richard Shelby, an Alabama Republican, said some of the big banks in trouble ought to be closed.
 
"Close them down, get them out of business. If they're dead, they ought to be buried," Shelby said. "We bury the small banks; we've got to bury some big ones and send a strong message to the market. And I believe that people will start investing in banks."
 
The faltering banking giant Citi -- the government recently increased its stake in Citi to more than 30 percent -- has always been "a problem child," Shelby said.
 
Orszag defended the administration's stark assessment of the economy, arguing that honesty would matter more than spin.
 
"People have been critical that we've either been too optimistic or too pessimistic. What the president is trying to do is tell the truth," said Orszag, who linked the nation's economy to its health care costs.
 
Orszag appeared on CNN's "State of the Union" and CBS's "Face the Nation." Cantor appeared on CNN while Boehner was on CBS. McCain appeared on "Fox News Sunday" and Shelby on ABC's "This Week."