It appears that upon leaving the Obama White House one undergoes an epiphany somewhat akin to St. Paul on the road to Damascus. This is particularly true for the economic team that the President chose.
Last fall at a luncheon announcing her leaving the chairmanship of the Council of Economic Advisors, Christina Romer admitted that she and the council made serious errors in their assumptions, that the stimulus failed and taxes should be cut to stimulate economic growth. However, during her tenure as Obama's chief economist, she faithfully toed the company line and was there to support the policies of the President. The latest example of this transformative action is Peter Orszag, former Obama Director of the Office of Management and Budget. In that position he oversaw and proposed budgets which averaged deficits of $1.4 Trillion per year. No effort was made to trim or argue against the massive spending spree of the Obama administration and the Democrats in Congress.
Yesterday Mr. Orszag wrote an op-ed piece in the Financial Times entitled: "America Must Brace Itself for Turbulence." From the article: At the Federal level the combination of ongoing weakness in the labor market and large structural budget deficits means the right policy mix should be more stimulus now and more deficit reduction, enacted now, to take effect in two to three years. Policymakers have acted on the first part, most prominently through the payroll tax holiday announced in December...
They have not, however, undertaken the harder work needed to reduce projected deficits over the next decade. Most fundamentally it is difficult to see how the medium-term federal deficit can be reduced to sustainable levels without additional tax revenue from those earning less than $250,000.00 a year. [Italics added]
If policymakers will not act before we have a fiscal crisis at the federal level, a fiscal crisis we will have.
Mr. Orszag concludes:
The bottom line is that there may well be US public debt tremors this year, both during federal debate over raising the debt ceiling and with at least a limited number of crises in local and city governments. The bigger problem, though, lies beyond 2011, as the unsustainablity of the federal government's fiscal trajectory becomes increasingly clear. I hope it does not ultimately require a crisis to restore fiscal sustainability at the federal level, but I fear it will.
This is a far different from the policies Mr. Orzsag or for that matter Ms. Romer were publicly espousing when they were in thrall to the Obama agenda. If they know now that the fiscal policies of the Obama administration are unsustainable, did they not realize it at the time when they were key architects of these actions?
It is always cathartic to realize the failure of one's actions and intentions; but in this case many millions of Americans are suffering and the prospect of severe economic upheaval in the not too distant future is a near certainty because of these failures.
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