Stimulus Needed as Well as Deficit Cuts, Orszag Says: Tom Keene
Losing momentum in the economic recovery, not rising inflation, is the biggest threat as the U.S. seeks to rebound from the worst financial crisis since the Great Depression, according to Citigroup Inc. (C)’s Peter Orszag.
“The major risk we face isn’t rampant inflation that is about to be unwound,” Orszag, vice chairman of global banking at Citigroup in New York, said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “The immediate risk we face is that the economic recovery is a bit wobbly, and whether it continues.”
Orszag, also a Bloomberg View columnist, is a former director of the Office of Management and Budget in the Obama administration.
The Standard & Poor’s 500 Index has gained 11.3 percent this year to its highest level since 2008 as positive economic reports have signaled growth in the world’s largest economy. Applications for unemployment insurance payments fell to match a four-year low, while the producer price index (SPX), a measure of inflation in wholesale prices, had the smallest year-over-year gain since August 2010, Labor Department figures showed today.
To keep momentum in the recovery going, Orszag said, there’s a need for a “barbell” approach to economic support, in which there is large stimulus up front combined with deficit reduction in later years. The two strategies balance one another, he said, and stand a better chance of receiving support from lawmakers.
In the current political environment, dominated by radicals on both sides and a lack of middle ground, he said, such calls aren’t being made.
“If we had the Congress of the ’60s, with a thicker middle, we would have a big deal,” Orszag said. “Now it is nowhere close to 100 percent probability. If you look at voting patterns, it is bimodal now, there is no middle -- especially in the House of Representatives.”
Orszag wrote in a recent column that to boost productivity and improve economic policy, the U.S. must begin by electing a new Congress.
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