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Former Obama budget chief seeks end-run around Washington gridlock

May 26, 2011|By Peter Nicholas
(Jay Mallin / Bloomberg )

Yes we can!

Or can we?

President Obama's former budget director, Peter R. Orszag, offered a grim diagnosis of Washington gridlock in a speech Thursday.

Obama and other public officials often talk about the need to overcome the political paralysis. Orszag, who now works for Citigroup, approached the problem from an entirely different perspective. Polarization is so entrenched, he said, that the only antidote may be finding ways to make Congress' inertia – its inability to do much of anything – work in the country's favor.

The idea is to design initiatives that take hold even if Congress fails to act. As an example he mentioned the Obama healthcare  overhaul.  The law sets up an independent payment advisory board charged with tracking Medicare and recommending ways to restrain costs if spending rises too quickly. Assuming Congress doesn't act on the panel's recommendations or offer alternative ways to control costs, the recommendations would go into effect automatically. A kind of end-run around Congress.

"The question becomes: Is it possible to take legislative gridlock and use it to your advantage rather than disadvantage," said Orszag, who was speaking at the Peter G. Peterson Institute for International Economics. "In order to do so, the default has to be flipped, so that legislative inertia leads to good outcomes rather than bad outcomes."

With his zeal for data, Orszag gave a theory of how the United States reached this point. Maps, voting patterns and demographic changes all show the country is more polarized now than was the case in the 1970s and '80s, he said. The reason? The growing tendency of people to live near like-minded people, he said.

"What's happening is that we are segregating ourselves residentially by political party," said Orszag, who until he left the Obama administration last year was one of the president's top economic advisors. "Democrats are moving into Democratic neighborhoods and Republicans are moving into Republican neighborhoods."

Orszag caused minor headaches for the White House when he ran the Office of Management and Budget and after he resigned. As OMB director, he was embarrassed by disclosures that he had three children from two different relationships and was engaged to an ABC correspondent.

After leaving OMB, he wrote a column in the New York Times laying out a compromise on the George W. Bush-era tax cuts set to expire. The president had wanted to let the tax cuts expire for the wealthiest Americans while preserving cuts for the middle class. Republicans balked at any tax increase. So Orszag suggested extending all the cuts for two years.

In the end, the president reluctantly took that approach.

Orszag revisited the recommendation in his speech Thursday. He suggested doing away with the tax cuts for the rich and middle class alike – once again putting him at odds with his old boss.

"We are asking the federal government to perform a variety of functions that are incompatible with the revenue base that we're providing," Orszag said.

Translation: the feds are broke.

peter.nicholas@latimes.com

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