Conrad skeptical of Obama deficit plan

Sen. Kent Conrad (N.D.) told White House officials Tuesday that the nation can't accept the budget's projected deficits at the end of this decade, which approach $1 trillion.

"We are on an unsustainable course by any measure," Conrad said during his committee's first hearing on the administration’s 2011 budget request.

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"I believe the president is taking us in the right direction over the next several years," he added. "But I must say I am very concerned about the long term."

Conrad took issue with White House Budget Director Peter Orszag’s target of cutting the deficit in future years so that it is equivalent to 3 percent of the country's economic output.

That's the level at which government revenues would equal all federal spending except on interest payments on debt, Orszag noted. But Conrad pointed out that debt payments would surpass $800 billion by 2020 and pushed for a true balanced budget.

"Put me down as a skeptic," Conrad said. "When we start excluding things for any purpose we tend to mislead ourselves about the gravity [of the situation]."

Conrad was more supportive of the administration's plan to run large deficits while the economy is still struggling. The budget calls for a total of $3.8 trillion in spending in 2011. That would produce a deficit of almost $1.6 trillion next year and $1.3 trillion in 2012. Those are due in large part to the high level of unemployment, which is pushing down tax revenue and increased spending on unemployment benefits and other safety-net spending.

Conrad warned against "premature deficit reduction," arguing that it was "critically important" to use deficit spending to help spur a weak economy.

The deficit will fall in half as revenue returns and spending decreases by 2013. But even then, the budget shortfall would be equivalent to more than 4 percent of GDP, far above the administration's target.

Obama's budget plan relies on a bipartisan fiscal commission, created by executive order, to come up with fiscal reforms that will cut the deficit to 3 percent of GDP by 2015. The fiscal commission is similar to one pushed by Conrad and Sen. Judd Gregg (R-N.H.), which was rejected by the Senate last week.

Gregg on Tuesday said he would push for another vote on his and Conrad's fiscal panel, which would have the power to force lawmakers to vote on its proposals unlike any panel that would be created by the president.

"An executive order commission gets you a report, but it doesn't get you any action," Gregg said.

Gregg also criticized Obama's budget plan, saying that the large deficits even in the short term would lead to dangerous debt levels. Economists warn that high levels of debt can handcuff the economy by crowding out private investment, which would reduce productivity and worker income.

"Let's stop putting forth budgets like this, which represent a death certificate for the American Dream for our kids," Gregg told Orszag.