The economic situation in America isn’t exactly great right now, but according to the man in charge of the U.S. budget, we could face an even more serious fiscal crisis in the next few years if politicians don’t get their act together.
Peter Orszag, the director of the Office of Management and Budget, expressed concerns Tuesday that the U.S. is on an “unsustainable fiscal course” and could face a budget crisis down the road if legislators don’t act quickly enough. "Frankly, the political system does not deal well with long-term problems until they become a crisis, and we do not want this to become a crisis," he said, speaking at a Reuters Newsmaker event.
Last year, the U.S. budget deficit grew to nearly 10% of the gross domestic product, or $1.4 trillion. By comparison, the previous year’s deficit was $459 billion, which was already considered sky-high. Orszag estimates that number will drop down to 5% by the year 2015, but he says we need to cut that down even further, to 3%. Unfortunately, Orszag says that our ability to accomplish this depends less on the U.S. economy and more on what he calls our “political economy.”
“Everyone wants the deficit to be addressed, but they are against everything proposed to address it,” he said. “What folks are willing to cut is much less than you would think.”
Orszag isn’t the only one to urge for deficit reduction. Ben Bernanke, the Federal Reserve Chairman, also pushed for it earlier this year. As it stands, health care reform may prove the most significant step on the path to deficit reduction, but Congress still needs to decide whether they will impose new tax hikes or cuts in government spending to reduce the deficit.
Orszag’s concerns carry even more significance now, as other countries around the world are on the verge of financial collapse. Spain’s economy is in tatters and Greece had to be bailed out by Europe earlier this month after its national debt ballooned, putting the country in danger of bankruptcy.
"We want to make sure we never wind up facing the sorts of choices that Greece now faces. However bad something looks right now, we want to make sure we are not in that position,” Orszag said.