"Deficits of this size are serious, and ultimately unsustainable."
-Peter Orszag, President's Director of the Office of Management and Budget, New York University 11/4/2009
On April 27, 2010, the President's 18-member Fiscal Commission held its first meeting. The President's Budget Director, Peter Orszag, provided the panel with analysis of the current fiscal crisis. Provided below are excerpts from Director Orszag's testimony:
"...Sustained, growing long-term deficits will increase our reliance on creditors from abroad, reduce investment in our labs, factories and businesses, and weaken confidence in the federal government's creditworthiness. Simply put, it may be easier to ignore long-term problems, but we will pay a severe price if we do so..."
"...Under current policies, our projected deficits amount to about 5 percent of GDP in the second half of this decade, much higher than would be prudent or sustainable. Exacerbating the problem are the long-term trends that we face as the combination of rising health care costs and an aging population will, if historical trends continue, drive up the costs of the federal government's three main entitlement programs: Medicare, Medicaid and Social Security..."
“…Large budget deficits have some combination of two effects. First, they will lead to a crowding out of private capital, reducing the funds available to finance domestic investment—and as a result, can elevate interest rates economy-wide …”
“…Second, they will require increased borrowing from abroad to finance that domestic investment. Either way, budget deficits reduce future national income—either because the nation does not have as much productivity-enhancing capital in the future or because we owe larger liabilities to foreign creditors....”
"...Achieving both that medium-term and long-term goal will require significant changes in policy..."