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Douglas Holtz-Eakin on spending cuts and the debt ceiling
Douglas Holtz-Eakin, president of the American Action Forum.
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JEREMY HOBSON: Vice President Biden will meet with members of Congress again this week to try and come up with a deal to raise the federal debt ceiling. The Treasury Department has said the nation will start defaulting on its obligations if no deal is reached by early August.
But on ABC News yesterday White House economic adviser Austan Goolsbee had this warning for lawmakers who want to push the debate right up to the limit:
AUSTAN GOOLSBEE: This is not an alarm clock. It would be extremely dangerous to get right up to the edge or you've seen some people even saying, 'Well, it'd be OK if we defaulted for a short period.' That's not true, we shouldn't do that, we should resolve this.
Now, last week on this show, we spoke with Jared Bernstein -- the former chief economist for Vice President Biden about this issue. This morning, we're pleased to welcome conservative economist Douglas Holtz-Eakin who heads the American Action Forum. Welcome to Marketplace.
DOUGLAS HOLTZ-EAKIN: Happy to be here.
HOBSON: Well, you think that Congress will raise the debt ceiling in the end. What do you think is going to be necessary for them to do that?
HOLTZ-EAKIN: I think that in order for it to happen, there will have to be associated with it, some real cuts in spending, both in the near term. And them some changes to the long term entitlement programs, the big one being Medicare, which would demonstrate to financial markets that we're serious about the real core problem.
HOBSON: Do you have a ball park figure in terms of how big those cuts might end up being?
HOLTZ-EAKIN: The speaker of the house, John Boehner, has said that he would like to see more in cuts than the increase in the debt limit. And so that gives you a ball park. If you want a bigger debt limit increase, you need more cuts.
HOBSON: We're talking hundreds of billions of dollars.
HOLTZ-EAKIN: I think there's no question the U.S. problem is a trillion-dollar problem. So, anyone who's playing with small billions is in the wrong ball park.
HOBSON: Would conservatives like you accept tax increases as part of the deal?
HOLTZ-EAKIN: There's no real intellectual case to be made for the tax increases. If you look around the globe, the countries that have a simultaneous growth problem and we have a very bad growth problem, and a budget problem -- the recipe for success has been to keep taxes low and then cut spending on transfer programs and government employment. That really is a playbook that the U.S. should run and be much more successful.
HOBSON: Well, some people would disagree with that, but the argument that would be made is if the poor are going to have to suffer in terms of cuts to services they rely on, why shouldn't the rich also have to suffer a little bit in terms of paying some more taxes?
HOLTZ-EAKIN: Raising taxes is not going to be good for growth. Period. And so the question then is can you have a balanced package of spending restrictions with affects both the affluent and the poor. The answer of course is yes.
HOBSON: If you look over seas you see the United Kingdom which enacted steep cuts to get their deficits under control. And their economy is now shrinking. Isn't that evidence that if we make big budget cuts that's exactly what's going to happen here?
HOLTZ-EAKIN: Well, I think if you look at what we're doing right now, we're perilously close to being in that position anyway. So what we really have to do is build a stronger foundation for jobs, and sailing directly into what the president's chairmen of his fiscal commission said was the most predictable crisis in history. We will have a financial crisis if we don't change course. That has to be the right thing to do for the American economy.
HOBSON: Douglas Hotz-Eakin, President of the American Action Forum. Thanks so much for joining us.
HOLTZ-EAKIN: Thank you.
Thanks, Jeremy Hobson, for asking about increasing taxes. I wish that more reporters would challenge people like Holtz-Eakin on this, for the economy has quite often performed much better with higher tax rates for the super rich. See, for example, Robert Reich's arguments on this matter, such as in his book Aftershock.
Mr. Holtz-Eakin rightly states at the end of his comments that "what we really have to do is build a stronger foundation for jobs" and yet his recommendations, as far as I can tell, work directly against this.
With lower taxes since the Bush administration, the creation of jobs has not been in the direction of jobs creation. Quite the opposite, as they continue to eliminate domestic American jobs in search of higher marginal, short term profits.
On the other hand, reducing the size of government will further reduce the jobs available to the huge pool of unemployed, and add to it - with no assurance of jobs creation. To take Medicare as an example, to force millionjs of senior citizens into the clients of private medical insurance will surely increase their profits, the medical costs to the nation as a whole, and provide not one further job to handle the responsibility of medical care for America.
Please, please, please...when you interview people who are lobbyists and representatives of the wealthy and powerful...please identify them as such!! You have a journalistic duty to identify who your interviewees represent.
"American Action Forum" is a shadowy lobbying group that does not disclose its contributors.
Douglas Holtz-Eakin is a lobbyist for BILLIONAIRES and BIG BUSINESS. As such, it makes perfect sense that he thinks that cutting taxes for the rich is the right way to "fix the economy".
He is paid handsomely to lie in public that tax cuts for the wealthy are what our economy needs. "What's good for big business, is good for the country" seems to be their sincere, if self-serving, belief.
Please identify your guests as lobbyists, and not merely as "President of American Action Forum".
What is this guys education level. I am taken back on his sponses to taxes and the fact that the private industry is sitting on so much cash not mentioned.
I am not why someone would not mention the loss of state jobs. I do not beilve the guy has econimic credentials to stand on.
Please publish to education credials on the people you interview, this guy sounded like he was reading from a script.
1st paragraph: The Treasury Department has said the nation will start defaulting on its obligations if no deal is reached by early August.
Despite all of Timothy Geithner's blathering, the US Government will NOT default. What will happen is that the US Government will honor its debts before it spends another penny on anything else ... Social Security and Medicare included. But since we have enough money in the budget to cover Social Security and Medicare, it means that the Federal Government will then come up short on cash elsewhere. They might have to furlough some employees at the EPA, for example. You say, "Oh my gosh, we can't do that!" And I say, "Why not?" Currently, teachers are being furloughed in states like California because they don't have enough money in their budgets. Are you going to tell me that a doughnut-eating coffee-drinking Federal Government employee is more important than a teacher?
