James Capretta, former associate director of the Office of Management and Budget, said Wednesday that with the right economic conditions, President George Bush could live up to his campaign promises to reform Social Security and cut the record-setting federal budget deficit in half.
Capretta, who was the administration's top budget official for health care, Social Security and pensions, education and labor policy, discussed this year's large budget deficit of $413 billion, which is 3.6 percent of the gross domestic product. Although significantly above the historical average, Capretta said the figure is well below deficits during the 1980s when analyzed as a percentage of GDP.
The global war on terror, homeland security and economic growth were the president's priorities, not a balanced budget, Capretta said in an interview with The Dartmouth before his speech at the Rockefeller Center.
"In that environment, you're going to have budget deficits," Capretta said. "There's a natural cycle to these things. Revenue will grow three to four percent in the next few years."
Capretta also defended Bush's spending record against criticism from fiscal conservatives, who argue the president spends too much. While conceding that overall spending increased dramatically during the president's first term, he pointed to non-defense costs as a better indicator of the president's attitude toward spending.
"Non-defense, non-homeland spending is on a downward trend during his last four years. It fell to just half a percent last year. During Clinton's last year this type of spending rose 15 percent," Capretta said.
During his speech, the Bush administration official bemoaned the sharp increase in mandatory entitlement spending through programs like Social Security, Medicare and Medicaid, which now constitute 55 percent of the federal budget.
Entitlement spending has reached such levels because of Medicare and Medicaid, which have grown at 11.6 percent and 12.1 percent over their respective histories, according to Capretta.
Rather than cut benefits as several experts have advocated, Capretta suggested that personal Social Security accounts could be a more viable solution both politically and economically. Personal accounts could help to alleviate some of Social Security's long-term problems, Capretta said, since bond and equity markets average returns of 5.5 percent while Social Security typically returns only two percent.
"So you can see the allure of these accounts," Capretta said. "If you can get money into them you increase the ability of people to provide for their own retirement substantially."
Students said they generally enjoyed Capretta's lecture and felt he was able to articulate the nation's financial issues in a non-partisan manner.
"It was interesting to hear how the president wants to cut the deficit in light of having to finance Social Security payments of older generations," Kathryn Jaxheimer '06 said.
"The one thing that will make it difficult to bring down the deficit in 2009 is if we're still in the intense battle we're in today," Capretta said.
Capretta is now an adjunct fellow with the Hudson Institute and a managing director of Wexler and Walker Public Policy Associates, a lobbying firm. Prior to joining the White House, he served for nearly a decade as a senior policy analyst on the Republican staff of the U.S. Senate Budget Committee under Senator Pete Domenici. Capretta began his career as a budget examiner at OMB from 1987 to 1990.
