The Economic Legacy of Peter Orszag

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President_Barack_Obama_with_OMB_Director_Peter_Orszag.jpg
White House budget director Peter Orszag, a hero to liberal wonks and steward of the president's embattled economic policy, is leaving the administration. Orszag, a former chief of the Congressional Budget Office who specialized in health policy, was the head of the Office of Management and Budget, and he will be the first member of the president's cabinet to leave the administration.

The two pillars of Orszag's legacy are the massive $800 billion stimulus bill passed in early 2009 and the health care reform bill passed about a year later. It's fair to say that both bills were policy successes and popular failures. The Recovery Act was the macroeconomic equivalent of throwing everything but the kitchen sink at the recession. It included hundreds of billions of dollars in tax cuts for working families, extended unemployment benefits, unburdened the states of massive Medicaid and education responsibilities, and seeded infrastructure projects across the country.

The Recovery Act might have stimulated the economy -- or at least built a floor to the downturn -- but it did not stimulate much gratefulness. Poll after poll in the last year and a half demonstrates consistent pessimism that the stimulus did much to create jobs. This is easily explained: the administration said that unemployment wouldn't rise above 9 percent after the bill passed. Instead it rose above 10 percent since the recession was deeper than predicted. That looks like failure, even if it's relative success.

Orszag's second achievement is another kitchen-sink bill and another liberal policy success that failed to inspire public approval. Health care reform created a new entitlement for tens of millions of uninsured Americans, planned cuts to Medicare and threw a smorgasbord of missiles at the real long-term monster of medical inflation, including: comparative effectiveness research, a Medicare advisory counsel, an innovation center and more cost-cutting experiments. But once again, folks aren't applauding. In a June Gallup poll, 50 percent of respondents said they wanted health care partially or completely repealed.

We could rehash all the reasons why the stimulus was necessary and successful, or why health care reform was necessary and should succeed. But both laws were contingent on benefits that Americans cannot see. For the Recovery Act, a teacher's job saved by federal assistance in Medicaid looks like a job that just exists, no thanks to the stimulus; whereas a lost construction job looks like a job the stimulus failed to save. For the health reform bill, the famed bend-curving provisions are delayed until much later in the decade. Even its proponents allow that while the bill changed the default position, it might not change the way we pay for health care.

Despite shepherding two of the most important liberal bills of our generation, Orszag's economic legacy is unwritten. One hopes historians will say he built the foundation for the recovery and for future health care overhauls. But in the short term, many Americans see the stimulus as a dud, and many Democrats see health care reform as an albatross. Orszag may turn out to be a historically successful budget director. For now the White House and the Democrat Party is a victim of his success, and the recession he's spent two years fighting.


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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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