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Obama’s White House Party Is Winding Down

You know a party is winding down when the revelers start heading for the exits. Though a few true friends will stick around to help the host clean up the mess, most partiers prefer to be out the door before the music stops.

This month’s planned departure of Peter Orszag, the White House budget director, is a sure sign that the good times are about to stop rolling for the Obama administration.

Orszag’s departure is not a total surprise. There has been speculation for months about which aide would be the first to go, and Orszag seemed a likely bet. He just finished the budget for the coming fiscal year, he announced his engagement to ABC correspondent Bianna Golodryga late last year, and he (at least according to the New York Times) never planned to stay in his position for more than two years.

The 41-year-old director, who Rahm Emmanuel claimed “made nerdy sexy,” has had a high profile since assuming his post. He was one of the primary forces behind two of President Obama’s top legislative priorities: the stimulus bill of early 2009 and the health care reform bill passed this year. Both are cases in which critics (myself included) argued that short-term benefits were oversold and overstated while long-term costs were underplayed.

Orszag oversaw two of the most unbalanced federal budgets in the nation’s history, more or less muttering his assent to the administration’s position that the mountain of federal debt was the unavoidable residue of the effort to restart economic growth. Now he is passing the job of closing the budget hole on to his successors.

The New York Times reported that he privately told associates it was time to quit while he was ahead. That choice is a luxury not everyone in the administration, or the country, can claim.

Losing the budget director just before the process of planning the next budget begins has made replacing Orszag a top priority for Obama, especially since the Senate must confirm the White House’s choice. This comes in the midst of intra- and inter-party disagreements about whether fiscal restraint is going to push the economy back into recession. Orszag is the third budget director in a row to leave after less than a year and a half.

The administration has painted itself into a corner. Repeated rounds of poorly targeted stimulus spending helped the economy somewhat, but produced relatively little bang for the vast number of bucks expended. Worse, much of that bang was temporary, such as the boost provided by the homebuyers’ credit that expired this spring. Demand for housing fell off a cliff once the credit ran out in May, and many of the homes that were bought would have been bought anyway. Housing starts and construction employment have slumped since the credit expired.

The administration’s poor track record left it isolated at the recent G-20 economic summit, in which leaders of most major economies maintained their newfound interest in fiscal discipline even at the cost of near-term growth.

Responsible spending will inevitably make its way to America. Orszag evidently doesn’t anticipate a fun time for whoever holds his current position next. Like a partier who suspects the booze may run out soon, he will be fashionably first out of the door. We can only hope the next budget director is less of a party animal.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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