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Peter Orszag, Former Top Obama Adviser, Takes Issue With Portrayal In New Book

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Peter Orszag, left, disagrees with author Noam Scheiber's portrayal of the economic team in the early days of the administration of President Barack Obama. | AP

WASHINGTON -- One of President Barack Obama's former top advisers is taking issue with his portrayal in a new book exploring the economic team's internal conflicts and external fumbles in trying to engineer a recovery during the first years of the administration.

In his book, "The Escape Artists," The New Republic's Noam Scheiber depicts the former chairman of the Office of Management and Budget, Peter Orszag, as one of the chief skeptics of additional stimulus spending during the waning months of 2009. When Orszag's position ended up winning the day with the president, the outcome was "especially tragic" for the economy and the administration's political prospects, Scheiber writes.

In an interview with The Huffington Post, Orszag, who left the White House in July 2010, argued that the portrait is not complete. The book "misses an absolutely crucial distinction," he said. "I am and was in favor of 'coupled stimulus' -- that is, additional stimulus in the short run, coupled with delayed deficit reduction but that was enacted at the same time as the stimulus."

The benefits of his approach, Orszag argued, were twofold. From the standpoint of economic policy, the business community applauded the nod toward long-term deficit reduction while the upfront stimulus had tangible benefits. And politically, the package would be an easier lift if it couldn't be portrayed as just another check.

"Being for coupled stimulus doesn't mean I'm anti-stimulus, which is how the book could be and is being interpreted," Orszag said. "And that's wrong," he added. "It's not that if you could actually get $100 billon in stimulus enacted in late 2009, it would be useless. Of course it would be useful to some degree. But that was not the question."

Added Orszag: "The question was instead, Should the administration go out with a $100 billion naked stimulus proposal when the administration is still trying to sell the Recovery Act itself as being sufficient, when the administration's economic projections are still showing a V-shaped recovery, and when we're about to go into a debt limit debate -- the one people forget -- in December 2009 and January 2010?"

Among the Obama administration's original economic advisers, Orszag has a record that has been one of the most difficult to judge. While his focus on deficit reduction and spending freezes earned him some enmity among progressives, his vocal championing of health care reform and his posture as a policy wonk won him plaudits.

His cozy relationship with the press complicated matters, enhancing his image with the public but earning him distrust inside the administration. In his book, Scheiber reported that Obama's top communications hand, David Axelrod, grew convinced by the second half of 2009 that Orszag was regularly leaking material to The New York Times.

ABC News reported on Thursday that Orszag appears to have been the source for one of Scheiber's biggest revelations in the book -- that Christina Romer, the Council of Economic Advisers' chair, outlined the need for $1.8 trillion in stimulus funds in an early transition memo.

That Orszag turned out to have quibbles with the book's content indicates how complicated it's been for members of Obama's economic team to shape their legacies.

According to "The Escape Artists," Orszag's skepticism with a stimulus-heavy approach originated during the days before Obama entered the White House. During the transition, Scheiber writes, "he'd worried that the sheer size of the stimulus could undermine the confidence of businessmen and money managers, who would fear an endless expansion of government spending would delay private investments as a result."

Orszag's belief that more federal spending wasn't synonymous with effective federal spending continued past the passage of the stimulus plan. Scheiber reports that Orszag butted heads with colleagues over his advocacy for a domestic spending freeze and the creation of a deficit commission, with Larry Summers, director of the White House National Economic Council, being among those arguing that it would undermine Democratic priorities. Orszag, in turn, reportedly declined to give Axelrod cover on deficit-reduction talking points, out of concern that it wouldn't come off as credible.

Asked about the rehashing of those debates, Orszag argued that they lacked proper and important context.

"A lot of this discussion was occurring in late 2009, and, don't forget, we had a debt limit constraint coming up," he said. "There was a debt limit increase that was signed into law, if I remember, in February 2010. That was a painful negotiation even though Democrats controlled both houses because there was a group of moderate senators who were concerned about voting for a debt limit increase and we needed their votes."

"And that was one of the primary motivations behind the Bowles-Simpson commission," Orszag added. "I believe the book misses this since we had this external constraint of having to get the debt limit increased."

Scheiber and Orszag do appear to be in agreement on one point: His arguments ended up titling the approach of the administration. By the fall of 2010, the president had fully embraced the idea that his administration needed credibility on dealing with the deficit even if he pushed an economic stimulus up front. A year later, the White House changed its tune, introducing the American Jobs Act and emphasizing immediate job creation legislation over long-term deficit reduction.

Orszag acknowledged that this approach was more in lines with the "naked stimulus" plank that he fought while at the Office of Management and Budget. But, he argued, this will end up being only temporary, likely to fade away once the political climate changes.

"You now have a little bit of running room to be promoting that approach right now," he said. "But roll forward to this time next year when again you're going to have another debt limit constraint. At that point, the naked stimulus approach becomes more problematic again. And rather than flipping back and forth, the coupled stimulus approach doesn't require so many shifts in emphasis."

"So, obviously a lot depends on context and timing, and strategies that sometimes work in some settings don't work so well in others," Orszag said. "Right now there is no external constraints, from either the debt limit dynamic or the financial markets on the naked stimulus approach."

UPDATE: In an email to the Huffington Post, Scheiber pointed to two portions of the book paint a fuller portrait of the economic argument Orszag was making while OMB Director. Below is one:

Orszag wasn’t opposed to additional stimulus in principle, so long as it was paired with long-term savings. But the practical effect of his deficit preoccupation, and his success at transmitting it to the president, was to narrow the range for action. At worst, Orszag contributed to an internal stalemate that rendered the president a bystander as the economy stalled out months later.


This may be more along the lines of what Orszag would consider a fair portrayal. But Scheiber's larger point -- that Orszag's skepticism of direct stimulus had the practical effect of blocking immediate legislative action -- is still one with which he would likely quibble.