Friday, December 13, 2019

Interview with Douglas Holtz-Eakin: Career, Budgets, Deficits

Mark A. Wynne of the Dallas Fed has one-hour interview: "Douglas Holtz-Eakin on Economic Projections, Deficits and Climate Change" (December 12, 2019). Holtz-Eakin has had an eminent academic career at Columbia and currently at Syracuse, but he is perhaps most widely lfor his time as head of the Congressional Budget Office from 2003-2005. Audio is available, but no full transcript. Here are some comments from Holtz-Eakin:

Why I became an economist
I’m an economist because in my senior year in college, I had a good adviser who pulled me aside and said, “You’re not ready to have a job. You should go to graduate school.” I was a math and econ double major, so I applied to all the math schools I could, all the econ schools I could. I got into math schools. And I got into a couple of econ schools with a little bit of [financial] aid, but it wasn’t looking great. And then fairly late in the game, Princeton [University] admitted me with a full ride and a stipend. So, they paid me to go to graduate school. I firmly believe I became an economist because of a clerical error somewhere.
As a staff economist at the Council of Economic Advisers in the early 2000s
At the White House, I found out that two things were true. No. 1, I would go into these meetings and I found that I was really teaching economics to the people who were lawyers and strategists—people who were not economists. And I realized I liked to teach economics, that I had been right about that instinct. The second thing I found out was that the academic research was super important. You invest a lot in research because in the policy process, people can and will say anything to get what they want. The only thing that checks them is the large amount of professional research out there that says, “There are a lot of things that could happen; that’s not one of them.”
At the Congressional Budget Office
The CBO was created by the Budget Act in 1974. Its purpose is to give the Congress the information it needs to make budgetary decisions. Think of the CBO as a consulting firm for Congress. It is nonpartisan by statute. There are two things that CBO directors cannot do: They cannot give policy advice, and they cannot pick sides.
In 2000, it appeared that the U.S. budget was actually in balance. There were projections of surpluses as far as the eye could see. I spent most of my time at CBO explaining why they were wrong. .... It was one of the situations where I know I was doing my job because nobody liked me.
Addressing the Deficit
Right now, there’s no way around it. To my friends on the right, I say, “We’re going to have to raise revenue. I’m sorry, you can’t grow your way out of this. It won’t work. There’s no way.” Then the question is, how can you intelligently raise revenue? The discussion should be about the quality of tax policy, not taxes up or down.
And to my friends on the left, I say, “You’re going to have to deal with the Social Security system that we currently have before we do big expansions.” It is just wrong that the Social Security program is right now scheduled to exhaust the trust fund in about 12 years. And at that point, if nothing is done, there would be a 25 percent across-the-board cut to people’s benefits in their retirements. That’s wrong. That’s no way to run a pension program.