Transcript: Douglas Holtz-Eakin On John McCain's Economic Agenda
© National Journal Group Inc.
Friday, March 28, 2008
|
 |
National Journal's Linda Douglass sat down with Douglas Holtz-Eakin for the March 21 edition of "National Journal On Air."
Q: I'd like to introduce Douglas Holtz-Eakin. He is the former head of the Congressional Budget Office of Congress, of course. He is now a senior policy adviser to presidential candidate John McCain. Welcome.
Holtz-Eakin: Good afternoon.Q: So let's start right off, plunging into all the economic issues that are currently facing the country and will be facing a new president. First of all, right now the economy is in terrible distress; people are losing their homes, housing prices are falling. There is a crisis on Wall Street, unemployment is rising. How much of this, if any of it, is the fault of President Bush?
Holtz-Eakin: Well, I think the key is to recognize that we have a couple of different problems facing the economy. There's the subprime mortgage problem, which is really, in the scale of things, smaller and concentrated in some states. Then there is the broader pressure on housing prices, which affects everybody, whether you have a mortgage or not. And finally, there's the credit crunch, which has been a powerful force emanating from Wall Street.Q: Back to my question, though: Are voters right to blame President Bush for any of this?Those three factors are really pressing down on the firms in America, which are, under the circumstances, still producing a fair amount. Employment has dropped in recent months, but so far there's not evidence that GDP is going to decline. So the real issue is, can there be a path forward in which those financial forces are kept from overwhelming the ability of America's small businesses to keep employing Americans? That is the key for success in the future.
Holtz-Eakin: Well, a president, whether they deserve it or not, always gets both credit on the upside and blame on the downside. It is clear that, in retrospect, we had inadequate supervision in some of the parts of the mortgage market, in particular. Secretary [Henry] Paulson recently called for a nationwide regulation of mortgage brokers, who, as it turns out, really had no financial interest in making sure people could pay the mortgages they'd been issued. So there have been missteps along the way. A president is ultimately responsible for the entire government that he administers, and I think you hear that coming from some voters.Q: John McCain has proposed continuing with President Bush's tax cuts, extending those tax cuts -- that would cost what, $2 trillion, say some analysts -- and eliminating the Alternative Minimum Tax, which would cost another trillion and a half dollars, and also continuing the American presence in Iraq until it is a stabilized country -- that's cost 600 billion dollars so far and climbing. How is he going to pay for all that?
Holtz-Eakin: I think if you look at the numbers, it's very revealing. At the end of fiscal year 2007, the last full year of the U.S. federal government, we raised in federal revenues 18.8 percent of GDP. So there's not a revenue problem in the federal government. There's a very big spending problem. That spending problem goes from stem to stern -- it is in the discretionary spending, it is in defense spending, it is in entitlement spending. And the proper focus of policy going forward has to be controlling the growth of federal spending.Q: Well, and on that subject, David Walker, the outgoing head of the Government Accountability Office, says that because of the burden of entitlement programs -- Social Security, and Medicare, and the aging baby boom that is going to take advantage of those government programs -- that we are going to be swamped financially, and that by 2040 we won't be able to pay for anything but that and interest on the debt. What is President McCain going to do about that?
Holtz-Eakin: He'll begin, and has I think properly made his intention clear, to veto any bill with pork barrel spending and earmarks. That's important not so much for the numbers involved, but it sends the message that the government is going to do the people's business and not the special interest business. And until that is done, it will not be possible to gain the confidence of the American people to undertake big reforms like Social Security, Medicare and Medicaid, which are absolutely essential.Q: Just a couple more questions about Wall Street... There has been some criticism about the increased role of the Fed -- of the Fed getting involved in this aggressive way to rescue a big Wall Street financial institution. And yet there has been no government step taken to try to rescue the homeowners who have been affected by this housing crisis. What about that argument? Is it right to have the federal government intervene in Wall Street but perhaps not in, I guess, what some would call Main Street?So that is step one. We can also go through the discretionary budget and find programs that aren't working -- the OMB says one in five programs are not meeting their goals. Those ought to be scrutinized immediately to see if they should be kept. And then Social Security: There are lots of ways to fix Social Security, and the commission has identified several. In my time at CBO, we identified a menu of options. It's a political issue that requires some leadership and a commitment to get it done and get it done fast. John McCain is committed to that.
And Medicare and Medicaid are reflective of the health care spending problem in America -- the rising spending on health care threatens those programs. It also threatens our businesses' ability to compete and offer insurance. It threatens American families' budgets. He has proposed a comprehensive health care reform, with the focus on controlling rising health care spending. It will require some leadership and hard work. But the next president has to do health care reform -- day one, and probably day two, day three, day four and every day thereafter. It is a very pressing American problem.
Holtz-Eakin: There are really four or five points that are relevant. First of all, Senator McCain has complete confidence in Chairman [Ben] Bernanke and the governors of the Federal Reserve system. His focus, Senator McCain's, is on the American family and making sure we get growth going again so they can have a job, because those jobs are the single best remedy for the ability to make mortgage payments, the ability to stabilize house prices. And quite frankly, a job absolutely outweighs any government program or policy.Q: OK, well, thank you so much for giving us a look at the economic policies and thinking of John McCain. We want to thank you again, Doug Holtz-Eakin, for being with us today.So the job growth has to be the focus. One of the threats to job growth right now is instability in financial markets, and in circumstances where the system is threatened, the senator applauds efforts made to shore up the overall financial stability. No single player in the system should merit government bailout. That is not what taxpayers' money is intended for. To the extent that money is targeted on shoring up the financial foundations, that is absolutely appropriate.
And going forward in addressing this mortgage problem, the senator would like to make sure that when taxpayer assistance is merited, both the lender and the borrower participate in taking a little bit of a haircut to make the deal go, that any public money be accompanied by reforms. People should be able to understand the mortgages they sign, lenders ought to have some accountability and transparency for the mortgages they issue and securitize. We have to make sure that we not only target assistance to those families who merit it -- we have to make sure we don't get in this position again.
Holtz-Eakin: Thank you.