* Stockman, former chief for Reagan, says deficit requires
* Orszag, former chief for Obama, says gradual fiscal fix
* Both endorse lower retirement payouts and end to Bush-era
NEW YORK, April 1 Two former U.S. budget chiefs
who worked for presidents from opposing political parties said
on Monday that the government should reduce military spending,
scale back Social Security payments and end decade-old income
tax cuts to reduce the federal deficit.
David Stockman, who was Republican Ronald Reagan's budget
director from 1981 to 1985 and a key architect of tax-cutting
policies, and Peter Orszag, budget director for Democratic
President Barack Obama from January 2009 until July 2010, agreed
the United States spends more on defense than is needed.
Both also said the country would be well-served if
better-off citizens paid more taxes and took smaller benefits
from the government in their old age.
But the two men, who appeared together at a Thomson Reuters
Newsmaker event, were at odds over how quickly and forcefully
the government should act to reduce the deficit. Stockman
contends the government should dramatically cut spending and
raise taxes to pay down the national debt.
Orszag says governments are right to use spending to
stretch out the economic adjustments to keep large segments of
population from losing their jobs, which itself can cause
The men spoke on the eve of the formal publication of
Stockman's new book, "The Great Deformation: The Corruption of
Capitalism in America."
Stockman calls his book, which runs more than 700 pages, a
screed. He says he wrote it to call attention to damage caused
over 80 years by crony capitalists, spendthrift politicians and
central bankers at the Federal Reserve who have inflated
financial bubbles by printing money.
Stockman criticizes politicians of both parties, starting
with Democrat Franklin Roosevelt in the 1930s and including his
former boss Reagan, as well as former Republican President
George W. Bush.
Stockman advises investors to sell their securities and hold
cash instead. He admits he does not believe Washington will
adopt his recommendations.
Stockman said in an interview, before taking the stage with
Orszag, that with his approach "there would be a lot of pain,"
with job losses and reduced income, perhaps for a generation. He
said that would be better than further putting off the day of
reckoning with the deficit.
Orszag told the audience, "David wants us to flog ourselves
to have some brighter future and the problem is that the
flogging can do some serious damage to that future."
Orszag said Stockman is wrong to place so much blame for the
weak economy and budget deficit on government policies. Changes
from new technology and global trade have hurt incomes and
employment, he said.
Some $85 billion of across-the-board government spending
cuts automatically took effect on March 1 after Congress and the
White House failed to agree on federal budget decisions. The
drain of money has put pressure on the U.S. Federal Reserve to
keep interest rates low to shore-up the economy.
Washington is having recurring fiscal showdowns over how to
slash the budget deficit and $16 trillion of national debt,
which was built from years of spending on wars in Iraq and
Afghanistan and stimulation for the U.S. economy.
In Stockman's book, he draws on his experience in government
and his mixed-success as a Wall Street executive to make his
Stockman, 66, became widely known in 1981 for criticizing
the institutions where he worked. He talked freely then to a
magazine writer for The Atlantic, which published his misgivings
about the Reagan administration's spending policies.
Orszag, 44, is now a non-executive vice chairman of
corporate and investment banking at Citigroup Inc. He was
director of the Congressional Budget Office before working for
Obama. He was also a White House economist in the administration
of former President Bill Clinton.