- The Washington Times - Wednesday, January 14, 2009

Massive budget deficits will continue even after the economy recovers from its deep recession unless budget policies are radically changed, the incoming director of the Office of Management and Budget told a Senate committee Tuesday.

Current budget policies would likely generate annual deficits between $750 billion and $1.2 trillion for years after the recession ends.

“Even after the economy recovers from the current downturn and under current policies, the nation faces the prospect of budget deficits that, we believe, will measure about 5 percent of [gross domestic product] over the next five to 10 years,” Peter Orszag told the Senate Budget Committee.

That was the good news.

“Over the longer term, the situation is expected to grow even worse as health care costs continue to rise and baby boomers retire,” Mr. Orszag said.

Even before consideration of President-elect Barack Obama’s economic-stimulus plan, which is estimated to cost at least $800 billion over two years, the budget deficit this fiscal year will reach $1.2 trillion, according to last week’s estimate by the Congressional Budget Office (CBO). Mr. Orszag was CBO director before he was nominated to be Mr. Obama’s budget chief.

Last week, Mr. Obama said the nation would likely face “trillion-dollar deficits for years to come” unless policymakers took action to prevent that likelihood.

In the Senate, the dire predictions were bipartisan. Budget Committee Chairman Kent Conrad, North Dakota Democrat, warned of a “demographic tidal wave,” and ranking member Judd Gregg, New Hampshire Republican, said the nation faced a “fiscal tsunami.”

Both senators enthusiastically endorsed Mr. Orszag’s nomination.

Mr. Conrad began the hearing with the oversized charts that have become his trademark. One showed the national debt, which nearly doubled under President Bush and will nearly double again within 10 years under current policies, reaching $21.3 trillion and nearly 100 percent of GDP by 2019.

During his stint at CBO and in his testimony Tuesday, Mr. Orszag emphasized that rising health care costs were the principal driver of the long-term deficits.

Mr. Orszag identified several ways to improve the efficiency of the nation’s health care system: expand the use of health information technology and electronic recordkeeping; expand research on “comparative effectiveness” of different treatment options; and provide incentives to prevent illness and live healthy lives.

“Peter Orszag has a tough job because he has to make it look like Obama can reduce health care costs after spending the last year issuing reports from CBO saying Obama’s health care proposals, such as health information technology and ‘comparative effectiveness,’ would not accomplish this goal,” said Michael Cannon, director of health policy studies at the Cato Institute.

Shortly after Mr. Orszag testified, the Treasury Department announced that the budget deficit for the first three months of fiscal 2009 totaled $485 billion, which already is $30 billion higher than last year’s record budget deficit.

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