Lew: 'We Must Put Our Nation Back on a Sustainable Fiscal Course'
Yesterday, the Senate Budget Committee held a hearing on Jacob Lew’s nomination as the new head of the Office of Management and Budget, where he received bipartisan support. Mr. Lew is currently the Deputy Secretary of State for Management and Resources and previously served as the head of OMB under former President Clinton.
Lew left OMB in 2001 amid a budget surplus and projected surpluses for many years to come. That track record and Lew’s experience crafting bipartisan agreement on fiscal matters were major selling points during his testimony. Lew did, however, acknowledge that the fiscal situation he is being thrust into today is far different than the one he confronted during his years in the Clinton Administration.
During the hearing, Lew argued that “there is no doubt that we are in an unsustainable fiscal situation right now.” Continuing in his opening statement, Lew stated that:
“In the late 1990’s, our challenge was how to maintain a prudent fiscal policy while transitioning into a world of budget surpluses and robust economic growth...Today, a series of policy choices and the worst economic downturn since the Great Depression present us with a very different set of challenges...I don’t think we’ve faced a more significant fiscal challenge in my lifetime, and we will be judged based on our ability to respond.”
When referring to the need for balancing economic recovery with the need for fiscal discipline to address the looming crisis, Mr. Lew argued:
“At the same time, we must put our nation back on a sustainable fiscal course in the medium-term while making investments critical to long-term economic growth; and how to shore up our fiscal position for decades to come. Indeed, the coming months may be the most critical time in fiscal policy in recent memory.”
Of particular note, Lew, when referring to our unsustainable budget path, said:
“We can’t put off for years worrying about the deficit...[the country must] take actions that will send a signal of real confidence that right over the horizon we’re putting in place the policies that will put us back on a path towards fiscal discipline.”
That statement got Lew close to joining CRFB's Announcement Effect Club, but not quite. A statement on how enacting a medium-term consolidation plan can actually improve the economy both now and in the long-term--by putting further downward pressure on interest rates and restoring confidence--would have been welcomed, but we'll keep listening for it.
As for the President's fiscal commission, Lew was hopeful, stating that:
“We’re looking very, very hopefully towards the results [of the commission] being in a place where the beginning of a bipartisan consensus can begin to develop.”
We're certainly hopeful too. But as we've argued here, the administration must have a Plan B in case the commission does not succeed, and there's no reason why the White House has to wait until December to begin seriously focusing on medium-term deficit reduction.
Lew also recognized that all options must be on the table for closing the fiscal gap and that there is no magic bullet:
“The challenge we have is to leave things on the table because the answer will not be one [policy] or the other.”
We at CRFB wish Jack Lew the best of luck and look forward to working with him to achieve fiscal sustainability. Click here to view the entire hearing and here to see how you would bring our fiscal house in order.