White House Chief Of Staff Jacob Lew: Now Is The Wrong Time For Austerity Measures

Washington, Feb 12 (Reuters) - President Barack Obama's chief of staff, Jacob Lew, defended his boss on Sunday for failing to cut the U.S. budget deficit, arguing that now was the wrong time for austerity measures as he urged Congress to extend a soon-to-expire payroll tax cut.

Republicans have slammed Democrat Obama for laying out a budget plan that they say is designed to help his campaign for re-election in November, rather than controlling the growth of the U.S. deficit and debt.

But Lew, speaking on Sunday television news shows on the eve of Obama's 2013 budget proposal to Congress, said the plan would outline $4 trillion in 10 year deficit reductions, alongside measures to deliver essential suport to near-term growth.

"I think there is pretty broad agreement that the time for austerity is not today," Lew, Obama's budget chief until few weeks ago, told NBC's "Meet the Press".

The White House says that Obama's budget will request over $800 billion in multi-year spending for job creation and infrastructure programs, including tax breaks for companies and individuals worth more than $300 billion in 2012 if passed into law.

Congress is free to ignore the president's proposals and Republicans have said Obama's budget will be dead on arrival.

The budget, which will delivered to Congress on Monday, projects the deficit at $1.33 trillion this fiscal year or 8.5 percent of gross domestic product, declining to $901 billion, or 5.5 percent of GDP, in 2013.

Obama pledged in 2009 to have halved the deficit by next year, earning the ire of Republicans.

"On this issue - the debt - this president has been completely AWOL. Republicans have had to fight tooth and nail for every dime in savings we've secured," Mitch McConnell, the top Republican in the U.S. Senate, said on Thursday.

Lew, however, argued that Obama's deficit promise was made before his administration truly understood the depth of the recession it had inherited from Republican President George W. Bush.

"When we took office, the economy was falling so fast that the first thing we had to do was put a bottom in ... It cost money in terms of lost revenue and slower economic growth. We're on track now," Lew told ABC News.

The White House said the funding gap will shrink to 2.8 percent of GDP by 2018, below the 3 percent/GDP threshold that credit rating agencies and investors see as the goal for stabilising the growth in national debt as a share of the economy.

Lew, who was the president's chief budget adviser until a few weeks ago, said Congress and the administration are working this weekend to see if a compromise can be reached over extending the payroll tax cut for 160 million Americans, which will expire on Feb. 29 unless Congress acts.

"They have two weeks now to do the important business so they don't get in the way of our economic recovery," he told NBC. The White House esimated extending the payroll tax cut for all of 2012 could add a percentage point to growth this year.

Comments

[killarneytim]

08:18 PM on 02/13/2012

Yes , it sounds good to say that now is not the time for austerity but the problem is there is no definition of when it is a good time for austerity. We are just kicking the can down the road again.

[dontcallmesurely]

05:39 AM on 02/21/2012

The right time for austerity is when the economy is stable. Given the slow growing economy the right time will be around 2016.

[catbite]

07:45 PM on 02/13/2012

And this is news? You can't keep cutting back in a time of need. We need to get the cash flowing again.

[steve11407]

08:32 PM on 02/13/2012

Oh it's flowing. Across the Pacific to China.

[Grichde]

05:44 PM on 02/13/2012

This nation where a sense of entitlement permeates, while personal responsibility goes missing. And we wouldn’t be a nation where politicians encourage entitlement through reckless and costly social-engineering programs that garnish the wealth of doers and transfer it to sluggards. 

[John Derrick]

01:56 PM on 02/13/2012

From the article, "The White House says that Obama's budget will request over $800 billion in multi-year spending for job creation and infrastructure programs, including tax breaks for companies and individuals worth more than $300 billion in 2012 if passed into law."

Ok, help me understand how spending $800 Billion over 2 - 3 years (presumably) and giving $300 Billion in tax breaks to companies and individuals will help "balance" a budget? Sounds to me like just more spending to me....

[beachgirlchix]

02:15 PM on 02/13/2012

The budget is balanced over a longer term period. When people go back to work and start paying taxes and buy products and pay sales tax on that, we pay down the debt.

[pavementends42]

03:35 PM on 02/13/2012

Spending money on projects makes money in the end. Cutting spending in times of low employment/spending(private), loses money/digs a bigger hole. People have to have jobs in order to spend it and buoy the economy back up. We need supporting infrastructure to promote business and allow people to actually get to work. The Republicans are pushing the opposite because it will either make Obama look bad, or they only share the interests of those who are wealthy enough to benefit from cutting restrictions/taxes. Cutting spending and freezing pay only stagnates what we have in place, it provides no room for growth. We have to invest to inject more money into the economy, the opposite will cause job loss and more downturn.

[allengoldchain]

01:19 PM on 02/13/2012

Jacob Lew, how can you talk about the budget when you are out there blatantly lying about the senate not being able to pass the budget becuase it requires 60 vote majority. The budget only requires a simple majority.

IT DOES NOT REQUIRE 60 VOTES! Blame the democrats becuase they have failed to pass a budget. They have failed to bring the spending under control.

[media4meisback]

02:00 PM on 02/13/2012

Of course the media didn't challenge him on it.
Where's the fact check now?

[allengoldchain]

06:51 PM on 02/13/2012

Even Washington post said he lied about the facts. looks like someone didn't get the memo to keep quiet.

[Dad24]

01:10 PM on 02/13/2012

Of course the Republicans are against President Obama's budget. It might actually make people feel better about the direction our country is going which would be good for President Obama. They will do everything in their power to keep the economy and employment in the dumps until after the election as their entire strategy is aimed at making President Obama look bad.

[Janzee12000]

12:14 PM on 02/13/2012

Fromer COO of Citigroup comes down from mountian of cash to tell us what we did for his company. Those that know of this (Republicans) aren't buying it because it's not their narrative... Sheesh!

[Krystal Braswell]

12:14 PM on 02/13/2012

Well when is the right time. Democrats don't want to touch entitlement programs. Republicans don't want to touch taxes nor defense budget problems. To me its a lot of talking and not enough action.

[beachgirlchix]

02:18 PM on 02/13/2012

Why don't we tell American and International bankers to suck it up and call a jubilee to forgive the debt? Bankers own more of our debt than China! Why are we worried about paying them back when they destroyed the economy? Am I wrong here? They committed fraud and got away with it. The least they can do (or we could put them somewhere for a long time to reconsider) is forgive the debt. We will not pay for their "crisis."

[dcflush]

12:00 PM on 02/13/2012

The Dem philosophy on deficits and debt: When the economy is doing great, try to run surpluses and save or reduce debt. When the economy is doing poorly, run deficits in order to stimulate and in order to create jobs and provide a safety-net.

The Republican philosophy on deficits and debt: When Republicans run the government, give the rich more and more and more money and run huge deficits. When Dems run the government, blame them for the debt and deficit Republicans created and say it's the end of the world unless Dems stop spending so much.

[StuffMoreStuff]

11:37 AM on 02/13/2012

He's right. Our descendants can handle 14 trillion in debt, let's pile on some more. Keep the party going.

[George Broadway]

01:05 PM on 02/13/2012

Why not, my parents and grand parents seemed to handle the equally large debt load from WWII. In fact, they came out golden. You might not have faith in this country, but the rest of us do. Every 50 years or so something big happens and the governments and their debts are the only things keeping the world economy from collapsing and pushing the world into another dark ages.

[StuffMoreStuff]

05:20 PM on 02/13/2012

Sorry, where's the macro event that would be the equiv. of MILLIONS of GIs coming home raising a family, buying homes, etc?! You're also missing the massive increase in the welfare state under gunz and butta, you're missing the fiscally conservative gov'ts of Truman and Ike, I could keep going, but I think it might be pointless if you actually believe the last sentence of what you typed. Unsustainable debt is the problem, not the solution. Good god. We really need to get better econ taught in school.

[beachgirlchix]

02:20 PM on 02/13/2012

Why are we worried about paying the debt the bankers who crashed the world economy "own?"

[StuffMoreStuff]

03:06 PM on 02/13/2012

That's funny.

[tsimpson2333]

11:08 AM on 02/13/2012

Wrong, Wrong, Wrong.

[miltonc4l]

11:03 AM on 02/13/2012

When's the "RIGHT" time Jake? Oh yeah ... 10 years from now when you and your boss are long gone having gotten rich through your connections.

[formontoya]

10:18 AM on 02/13/2012

If we have a budget...and roughly 1/3 of it is overage...and we have done this (over budget thing) for years and the new budget asks for more of the same...THEN WHEN THE HE!! IS TIME TO START TO TRIM SOME OF THE FAT???

[Larry Larry]

11:23 AM on 02/13/2012

Very astutely put, formontoya. How is it that we look at these things on a small scale (take your household budget for example), and yet when the figures are enlarged (the Federal budget) we cannot seem to grasp the same simple logic to address the situation?

At least Obama is finally starting to figure it out a little (after three years on the country's dime). I hope he got a good education out of all this, as we may be stuck with him and his clueless cohorts for another stagnant term. Not that it's all his fault - Repubs in the past have been almost as careless with our money - take a good look at what the republican demi-god Ronald Reagan did to inflate the deficit during his two terms (though he did have to deal with budgets from a democratic congress). I guess this is why I became a libertarian - too much meaningless talk from both major parties.

[George Broadway]

01:11 PM on 02/13/2012

Larry,

You are incorrect in your assumption that the economies of the micro (family) and macro (governments) scale are logistically similar and principle concepts apply unilaterally. The US government had to shoulder very large debt between 1930 to 1950, larger as a percentage of GDP then even now by the end of the war. In fact, it was the war and ramping up of the military industrial complex which brought the country out of the depression eventually.

The logic is far from simple when you realize how interconnected global markets are and failure means the collapse of the world as we know it.

[dcflush]

11:52 AM on 02/13/2012

The time was 1998 to 2007. Unfortunately, Republicans decided that the nice surpluses we had should go to the wealthy. Oh and not just the surpluses, but much much more should be given away to the rich.

See, Dems understand that in good times, you create surpluses, and in bad times you create deficits. Republicans believe that when Republicans hold office you create deficits and when Dems hold office you cry about deficits.

[Under Fed yet Fed Up]

09:54 AM on 02/13/2012

"The White House said the funding gap will shrink to 2.8 percent of GDP by 2018, below the 3 percent/GDP threshold that credit rating agencies and investors see as the goal for stabilising the growth in national debt as a share of the economy."

In other words we'll control spending after the federal bankruptcy?

[dcflush]

11:53 AM on 02/13/2012

In other words, we'll reign in the Republican fiscal irresponsibility with rational, controlled reductions, combined with tax increases at responsible intervals.

[Under Fed yet Fed Up]

09:36 PM on 02/13/2012

The only question is why would you want your children and grandchildren to pay for your generations irresponsible fiscal actions?

Deficit spending is a political cowards way of buying votes. Period.

[John Derrick]

02:14 PM on 02/13/2012

There are two forces at play in our economy; short term debt (recurring debt) and long term debt ($16 Trillion...and growing). Let's not be fooled by their narrow-minded rhetoric here of "short-term" debt (as a percentage of GDP). Both short AND long term debt must be resolved and unfortunately, this means the "pain" bar must be raised on the poor and middle classes. The GDP ( http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_fy2011outlook.pdf ) remains a bleak outlook through 2021 and is still climbing as detailed therein:

"The deficits that will accumulate under current law will
push federal debt held by the public to significantly
higher levels. Just two years ago, debt held by the public
was less than $6 trillion, or about 40 percent of GDP;
at the end of fiscal year 2010, such debt was roughly
$9 trillion, or 62 percent of GDP, and by the end of
2021, it is projected to climb to $18 trillion, or 77 percent
of GDP. With such a large increase in debt, plus an
expected increase in interest rates as the economic recovery
strengthens, interest payments on the debt are poised
to skyrocket over the next decade. CBO projects that the
government’s annual spending on net interest will more
than double between 2011 and 2021 as a share of GDP,
increasing from 1.5 percent to 3.3 percent."

[Under Fed yet Fed Up]

09:39 PM on 02/13/2012

Just wait until world wide liquidity dries up as a consequence of the European fizzle and interest rates explode. Imagine a $16T debt at 8% interest. That would be almost $1.3T per year in interest only.

[msull84846]

09:53 AM on 02/13/2012

you are right...now is not the time...it was long ago...so we are very late in doing so.......stop with the can kicking