John Podesta and Douglas Holtz-Eakin argued over tax cuts, health care reform and the role of government in the private sector as they discussed how to speed up a stalling economic recovery and lower the United States' record deficits at George Washington University on Tuesday night.
Holtz-Eakin, president of the American Action Forum and an economic adviser to the White House during the George W. Bush administration, stressed the dangers of big government and warned that raising taxes during a recession would be "extremely unwise." Podesta, president and CEO of the Center for American Progress and White House chief of staff under Bill Clinton, called for the government to adopt a "core set of progressive economics" by concentrating tax relief on the middle class and stimulating the economy.
The debate over America's fiscal future took place amid increasingly contentious partisan wrangling over the extension of the 2001 and 2003 Bush tax cuts, currently set to expire Dec. 31.
Podesta argued against extending cuts for the top 2 percent of earners, saying that the federal government should stop "continuously praying at the altar of taking care of the richest Americans."
He likened the movement to maintain those cuts to a "Republican TARP" as he said that it amounts to tax assistance for "rich people who don't need it."
Holtz-Eakin took issue with Podesta framing the issue in terms of fairness; the tax system as a whole is one of wealth redistribution from the top to the bottom, he noted, so applying fairness to one part is disingenuous.
"It's hard to make the argument that somehow the affluent in America are 'getting ahead' on the federal budget," he said.
Both men emphasized the direness of the country's economic situation -- Podesta by stressing the bleakness of the balance sheet President Obama inherited from the Bush administration and Holtz-Eakin by alluding to the possibility that the U.S.'s foreign lenders may pull the rug out from under it if the current administration does not change course.
Holtz-Eakin said that entitlement spending will have to be cut, a move he acknowledged would normally be considered politically unfeasible.
"Everything you have learned about how politics interacts with budgetary policy has to be discarded," he said. "We don't have an option that says, 'Yeah, we're just going to snark at each other for the next eight years.'"
While Podesta said that Obama's policies will help control deficits, Holtz-Eakin said they are aggravating them, and that increasing government spending, while attractive in a recession, is not a long-term solution. Even spending increases that are conceived as temporary jumpstarts, he said, often end up staying on the books and draining the economy further.
Both Podesta and Holtz-Eakin pointed to an inefficient health care system as being particularly dangerous to the nation's economic health, though they disagreed pointedly on health care reform. Podesta praised this year's health care legislation and its projected savings, while Holtz-Eakin contended that the budget is worse off than it was before the law was passed.
When pressed by moderator Jim Tankersley, National Journal's economics correspondent, on whether tax reform is feasible, both men confessed that it was unlikely in the short term. They also agreed that the deficits will likely not drive cap and trade forward, though Podesta said clean energy can be a "very powerful driver in the economy."
Holtz-Eakin, meanwhile, argued that adopting new sources of energy only moves jobs rather than creating new ones.
One audience question was permitted: Podesta and Holtz-Eakin were asked which strategy of the other's they would pick to fix the budget. After some hesitation, Holtz-Eakin praised the Obama administration's commitment to education, which he said was central to the country's recovery. Podesta said he and Holtz-Eakin likely agreed on reform of the corporate tax code, which he deemed overburdened and over-lobbied.