1. The Obama administration has already conceded it has no long-term plan to deal with rising U.S. debt, driven for the most part by social insurance spending. Testifying before the House Budget Committee recently, Treasury Secretary Tim Geithner told Chairman Paul Ryan the following: “We’re not coming before you to say we have a definitive solution to that long-term problem. What we do know is we don’t like yours.” Even Obama’s ten-year plan doesn’t keep the debt burden from increasing.
2. Yet, apparently, the White House does have a secret plan to deal with a sudden debt crisis. So instead of developing a long-term plan to avoid the worst-case scenario, it has chosen to plan for the worst-case scenario. (This will certainly be a shock to liberal economists like Paul Krugman and Brad DeLong who insist a debt crisis, as evidenced by the current low level of interest rates, is highly unlikely. In fact, they say, we should be borrowing more to boost the economy.)
3. Then there’s this possibility: Maybe the crisis plan is the long-term plan. Maybe it’s something like this: a) do nothing; b) keep implementing the Obama healthcare and environmental agenda; c) wait for markets to finally freak out over rising U.S. debt; d) break the glass and grab the 2009 Orszag plan.
4. And what exactly is in the Orszag memo? Well, as they say in Washington, personnel is policy. Here’s what we know about Orszag, who now works for Citigroup. He thinks America is undertaxed. Elsewhere in Escape Artists, Scheiber writes that “[Orszag] believed the only practical way to balance the budget was to repeal all the Bush tax cuts, not just the upper-income variety.” That is a $4.5 trillion tax hike right off the bat.