The first thing we had to do was get the recovery act enacted. We did that. That's intended to address that first gap, the GDP gap. As we go out over time and the economy recovers, we need to get those out-year deficits down, and that's what this budget does.
STEPHANOPOULOS: But the question is, is the stimulus going to be enough to actually get the kind of growth you're calling for? I want to show a chart here that shows where the OMB projections of the economy turn up right now.
You say that, over the next year, the economy is going to fall about 1.2 percent, the average private forecast 2.0 percent. The case you're putting to the banks, the stress tests you're putting on the banks assumes that the economy is going to fall by 3.3 percent.
And, you know, economists like Allen Sinai say it's a hope, a wing, and a prayer. It's a return to a sanguine view of the economy that is simply not justified.
ORSZAG: Well, what I would say is, our forecast is entirely in line with, for example, the Congressional Budget Office's, once you include the effects of the recovery act. Now, since those forecasts were done...
STEPHANOPOULOS: You got this bad news about last year.
ORSZAG: ... and the -- which is why it's a good thing we acted so quickly on the recovery act. Going out over time, we have to get these out-year deficits down, and that's what we're intended to do.
STEPHANOPOULOS: But -- but -- but looking at this year, because your whole deficit reduction strategy hinges on the economy growing at the rate you say it's going to grow. It is still realistic to think your numbers are going to be met?
ORSZAG: I think so. And, again, the deficit reduction doesn't just come from the economy recovering. And by 2013 or 2014, let's all hope that the economy is back on its feet. That's what we're trying to do through all -- all the changes that we're making.
But we have $2 trillion in deficit reduction contained in the budget. We've got both spending constraints and additional revenue, as the economy recovers. That's where a lot of the deficit reduction comes from.
STEPHANOPOULOS: But most of the deficit reduction comes from assuming at first that the war in Iraq was going to continue at the same levels for several years, and that simply wasn't going to happen, was it?
ORSZAG: Well, let's -- let's be clear about this. We're going to spend about $140 billion on the war this year. The president is committed to getting -- to winding down the war. That's going to save money. It's pretty clear.
STEPHANOPOULOS: The Republicans have taken aim specifically at the revenues in this package, especially the idea you have to get about $600 billion from capping carbon emissions. Here was Newt Gingrich speaking this week.
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GINGRICH: How dumb do they think we are that they can pretend that an energy tax isn't an energy tax, and they can pretend that every retired American who uses electricity isn't going to pay it, and every person in New Hampshire who uses heating oil isn't going to pay it, and every person who drives a car isn't going to pay it?
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STEPHANOPOULOS: You've talked a lot about honesty and transparency in the budget. The Republicans are saying you're simply not being honest, that this revenue from the carbon -- from capping carbon tax is going to be a tax on everyone, pure and simple.