Obama to Cut Wasteful Spending

Faced with a rising deficit and a sour economy, President-elect Obama vows to make tough budget choices down the road.

President-elect Barack Obama may need to forge a relationship with kitchen knife manufacturer Wüsthof Trident-because he's going to need a lot of help trimming the fat from the federal budget.

A more conservative Obama takes shape

When Obama was campaigning for the presidency, he spoke often about the beleaguered state of our economy and his plans to foster an economic recovery. For the most part, he gave the impression that he favored a larger, more expensive role for the federal government going forward. But in the weeks that have followed Election Day, Obama's tone has changed. He's compiled an economic team consisting largely of Clinton-era experience and centrist philosophies. He has tempered his outlook on tax increases for the wealthy. And, most telling, the president-elect has acknowledged his awareness of the problems associated with the exploding deficit.

This more conservative Obama recently vowed to cut wasteful spending out of the federal budget. Then he added some force to that budget cuts pledge by announcing the nomination of Peter R. Orszag as director of the Office of Management and Budget.  Orszag is quite familiar with the economics of Washington. In the 1990s, he served as Senior Advisor on the Council of Economic Advisers and as special assistant on economic policy to President Clinton. More recently, he was the director of the Congressional Budget Office between January 2007 and November 2008.

Upon announcing the nomination, Obama indicated that Orszag's background and insight will allow him to hit the ground running with respect to effective, conservative budget management.

Balancing economic recovery with budget cuts

The president-elect has a challenging road ahead of him. This country and the world are badly in need of an economic recovery, and it has to happen before a destructive deflationary cycle takes hold. The trouble is, many economists believe that this situation should normally be addressed with aggressive deficit spending. But when the federal deficit is already wildly out of control, the administration also has to worry about the burden placed on future generations. The problem is particularly complex given that the Medicare and Social Security systems are also headed for trouble.

Deficit spending for fiscal year 2009 is currently estimated to be about $1 trillion. That figure doesn't include the cost of further fiscal stimulus programs, which could add another $500 to $800 billion.

The Obama administration has inherited the tricky task of spending to foster economic recovery, while continuing to manage the deficit conservatively. Said another way, this new economic team will have to trim away every ounce of fat, while it works to build up this country's vitals. Arguably, this is something no president has ever accomplished. But as Obama himself explained, "The old ways of Washington simply can't meet the challenges of today and tomorrow."