The Orszag Chronicles

by Pejman Yousefzadeh on April 29, 2009

No, it’s not a new science fiction novel. Rather, this post is dedicated to the profile of Peter Orszag which was written by Ryan Lizza and which appears in the most recent edition of the New Yorker. It portrays a hyper-smart, hyper-political Budget Director, but at the same time, raises a whole host of questions.

Here’s one question: What is it with the rivalry between Orszag and National Economic Council (NEC) chairman Larry Summers?

On some issues, they were viewed as like-minded, a pair of Scrooges concerned with deficits and more hesitant to embrace expensive programs. A senior White House official talked of an N.E.C./O.M.B. “axis.” According to some, though, this two-headed beast was occasionally at war with itself. One sign of the uneasy relationship came before an early budget meeting, when the staffs of the two men, an Administration official said, competed for the seat directly across from Obama, the spot reserved for the lead official in the policy area under discussion. The coveted seat was given to Orszag. Summers sat next to the President, which, according to White House protocol, meant that he was attending the meeting in his role as head of the N.E.C., not as the leader of the budget process.

Summers is a brilliant yet heroically self-regarding economist. His capacity for equations is not matched by a capacity for working easily with others. When I asked the senior White House official about the relationship between him and Orszag, he replied, “There’s a little turbulence between Larry and everybody, because that’s just the way he is.”

In the Administration, Summers has tried to hold potential intellectual rivals at bay. He reportedly restricted the influence of Paul Volcker, the former Federal Reserve chairman, who leads Obama’s economic-recovery advisory board. (A spokesperson for Summers denied that.) But Orszag, a mid-level economist in the late Clinton Administration when Summers was Deputy Treasury Secretary, was someone who could keep up with him in policy expertise, and who proved to be a subtle and persistent political player. Unlike Summers, Orszag is not especially confrontational. He sometimes leaves advisers on opposite sides of an issue with a sense that he has supported their view—a distinctly Obamian quality. It was Orszag, drawing on his Hill connections, who helped Rahm Emanuel, the President’s chief of staff, and Obama close the stimulus deal with Congress in February. Harry Reid, the Senate Majority Leader, recently said he was so impressed that he called Orszag to tell him that though “he is not a longtime person involved in politics, he is a natural.”

Nice to see that Orszag can hold his own, but just how long will he be able to do so? And what’s the reason behind the fight in the first place? Is it that Orszag has proven himself to be something of an intellectual equal and Summers just can’t take being second to anyone? Can’t be; there are a number of stories discussing how Summers–while tremendously taken with his own intellect–respects others when they stand up for themselves and stand up to him, intellectually. Summers’s famed ability to take dissent was, after all, the reason why Tim Geithner–no shrinking violet when he worked for Summers–was able to advance in the world with Summers as his patron. Why, then, can’t he take dissent or competition from Orszag?

One would think that perhaps, just perhaps, policy differences might have something to do with the slightly chilly relationship between Summers and Orszag. But Lizza makes no mention of those differences. What’s going on? Who knows? All I know is that the Volcker precedent is hardly comforting.

Later on, we get the standard line that comes up in any piece about Orszag; his belief that health care reform is deficit reduction. I am not a fan of this claim, at least when it comes to Orszag’s plans for health care reform. Lizza gives me no reason to reconsider my skepticism. I am glad that he agrees with me when he says that “Orszag became perhaps the dominant voice on health care within the White House” in the aftermath of Tom Daschle’s failed nomination; Lizza’s statement fits in with my appellation of “czar” when it comes to Orszag’s role in health care reform. But with great power comes great responsibility, and great responsibility means taking care with one’s policy estimates. Orszag hasn’t done that when it comes to health care reform.

Much of the article is devoted to praising Orszag for papering over the fact that the Obama Administration’s budget, and the Senate’s budget, differed in key places. If the Bush Administration pulled that kind of trick, one can rest assured that the New Yorker would have attacked it for demonstrating a certain mendacity. But the key passage that ought to give alarm is the following:

A week later, on March 25th, Orszag was in his office with Kenneth Baer, his communications director, preparing for a conference call with more than a hundred reporters. At the White House, the intellectual debates of conceiving and writing the budget had given way to the realities of campaigning for it. The mood at O.M.B. was grim. The C.B.O. had released its numbers and was projecting that Obama’s budget would mean a deficit of $2.3 trillion more over ten years than the Administration was predicting. Even worse, its assessment of Obama’s budget indicated that the Administration would violate its self-imposed deficit cap—three per cent of G.D.P.—every year through 2019, when the deficit would reach 5.7 per cent.

During the Presidential campaign, Barack Obama promised us a net spending cut at the end of his first term. That’s not going to happen. After deriding the saying for so many years, Democrats have apparently decided that “deficits don’t matter.”

Finally, we have the following from Lizza:

As Orszag explained his ideas, I couldn’t help remembering an encounter I had with him one day in the hallway at O.M.B. I told him that I had read his Princeton undergraduate thesis. He looked at me and smiled a little sheepishly. He said that at some point after his arrival at graduate school, in London, he had had a sudden realization: that he had made a mistake, and the crucial formula that he had used in his thesis, the one that had won him the prize, was incorrect. “It was so innovative,” he said, “that it was wrong.”

“It was so innovative, that it was wrong.” The epitaph for the Obama Administration?

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