White House Budget Director Peter Orszag responded to warnings about unsustainable debt projections by touting potential savings from the healthcare bill and President Barack Obama's bipartisan fiscal commission.
Orszag echoed the concerns of independent economists about the federal
debt, whose estimated growth over the next decade has set off calls to
deal with it from Federal Reserve Chairman Ben Bernanke
and the independent Congressional Budget Office.
"Projected deficits are too high, need to come down," Orszag said. "We absolutely need to get ahead of that problem."
Failing to do so could result in a fiscal crisis that would force "an excruciating set of tradeoffs that nobody would want to live through," he added.
Deficits averaging nearly $1 trillion over the next 10 years will grow the level of debt from roughly 63 percent of gross domestic product this year to 90 percent by 2020, according to CBO projections of Obama's policies.
The health bill may lead to savings that CBO hasn't accounted for, Orszag said. The independent Medicare advisory board, which will propose health savings that will be fast-tracked for consideration in Congress, and other pilot programs in the health bill could save money by moving the country from a fee-for-service healthcare system to a more efficient model based on payments for quality of care, Orszag said.
"To a degree that is not yet fully appreciated, we have now put in
place the levers or infrastructure [to move] toward paying for quality
over time," he said.
Orszag said the Medicare payment advisory board "could prove to be far more important to the future of our fiscal health than, for example, the CBO," the government's official fiscal scorekeeper, he said.
A deficit reduction plan could also emerge from the White House fiscal commission, which includes Congressional Republicans and Democrats and members chosen by Obama, Orszag said. The president has asked the panel to find a proposal to reduce deficits to sustainable levels after the mid-term election in November. Democratic leaders in both chambers have said the proposal would be voted on.
"It's above where we need to be," Orszag said of deficit estimates. "We believe that the right way to get the way there is thru a bipartisan process."
Orszag downplayed a suggestion by White House adviser Paul Volcker this week that new taxes, possibly a value-added tax, are needed to rein in debt.
"Mr. Volcker was speaking in his private capacity, not in any official capacity," Orszag said.
"The whole purpose of the fiscal commission is to allow policy makers to explore various options to address not only medium term, but the long-term fiscal imbalance," Orszag said.