Douglas Holtz-Eakin is everywhere. This week, the conservative economist and former director of the Congressional Budget Office co-authored a widely read--and widely panned--prescription for Republican health care reform. And for months, the President of the American Action Forum has used his perch on The Guardian op-ed page to slam President Obama over the U.S. national debt. But as it turns out, when he was the chief economic adviser to GOP White House hopeful John McCain in 2008, Douglas Holtz-Eakin declared, "I would like the next president not to talk about deficit reduction."
Of course, you wouldn't know that reading his jeremiads about the deficit now. In the wake of the "fiscal cliff" deal, Holtz-Eakin rightly decried the "meat-axe" cuts of the budget sequester while nevertheless proclaiming, "Neither spending nor the deficit should be allowed to increase." And despite today's low U.S. inflation, shrinking deficits, and total federal tax bite as a percentage of the American economy near 60-year lows, Holtz-Eakin darkly warned last week:
The orthodoxists will trot out the usual fears of austerity and the need to spend to prop up the economy. Just remember that the intellectual foundation for this view is rooted firmly in an alternate universe. We listened to this advice in the 1960s and 1970s, and the political class translated it into chronically high unemployment and chronically high inflation. Economists learned nothing and continue to peddle the same backboard-based remedies.
Down with the orthodoxy. It is time to get the deficit under control.
But when he was John McCain's numbers guy five years ago, Douglas Holtz-Eakin was singing a different tune. As the New York Times
reported on April 14, 2008:
Douglas Holtz-Eakin, Mr. McCain's chief economic adviser and a former director of the Congressional Budget Office, said the benefits of success in Iraq dwarfed the $150 billion annual cost. He also said that if the war and the personal and corporate tax cuts that Mr. McCain advocated added to the federal deficit and debt, so be it.
"I would like the next president not to talk about deficit reduction," Mr. Holtz-Eakin said at a symposium sponsored by the Committee for a Responsible Federal Budget. "The next president should talk about what's good for American families -- education, health care at reasonable costs, pensions that are secure, opening our borders to trade. If we can take care of that, we can take care of the budget." [Emphasis mine.]
As we'll see below, Holtz-Eakin's preference for silence on the budget deficit was well-founded.
After all, John McCain's proposals to make the Bush tax cuts permanent, slash corporate taxes and half the already historically low levy on capital gains were forecast to produce red ink as far as the eye could see. And that was before the economic meltdown of September 2008, which gutted federal tax revenue while triggering crisis spending on TARP, the stimulus and other counter-cyclical programs including food stamps, unemployment insurance, and Medicaid. In May 2008, Holtz-Eakin acknowledged of McCain's economic program, "It will make deficits expand up front, no question." (Daniel Gross of Newsweek was even blunter, announcing "McCain's fiscal program is either a joke or a fantasy.")
As it turns out, McCain's proposed tax cut windfall for the wealthy was also a repudiation of his earlier opposition to the Bush tax cuts of 2001. "I cannot in good conscience support a tax cut," he said, "in which so many of the benefits go to the most fortunate among us at the expense of middle-class Americans who need tax relief." But as the Center for American Progress explained during the 2008 campaign, McCain was born again as a supply-sider:
Our analysis suggests that the McCain plan shares five key characteristics of Bush policies. First, it is enormously expensive, costing more than $2 trillion over the next decade and essentially doubling the Bush tax cuts. Second, the McCain plan would predominantly benefit the most fortunate taxpayers, offering two new massive tax cuts for corporations and delivering 58 percent of its benefits to the top 1 percent of taxpayers. The Bush tax cuts provide 31 percent of their benefits to the top 1 percent of taxpayers.
Third, the McCain tax plan continues the shift of the tax burden from investment income onto earned income. Fourth, the plan not only fails to address current tax shelter problems in the tax code but in fact will lead to increased sheltering. Fifth, McCain cannot pay for his tax cuts without massive reductions in Social Security, Medicare, or other key programs that benefit the vast majority of Americans.
That's why John McCain could neither explain nor possibly keep his 2008 campaign promise to balance the federal budget
by the end of his first term. At a February 15, 2008 rally in Wisconsin, McCain pledged to end the red ink by 2013:
"I've got to give you some straight talk: I doubt, given the deficits we're running, that I can propose a balanced budget in the first year. But that's my goal. It has to be our goal, because we're mortgaging these young people's future."
Douglas Holtz-Eakin wasn't so sure. As ThinkProgress recalled, he reversed himself on the same day:
- "McCain pledges to balance the budget by 2012, not by increasing taxes, but by vetoing all pork barrel spending, and curbing outlays for Social Security and Medicare." [Fortune, 2/19/08]
- "McCain's overall goal is to balance the budget by the end of his second term, says [economic adviser Douglas Holtz-Eakin]. That would be 2017." [Robert Samuelson, 2/19/08]
For Holtz-Eakin, the fuzzy math of the McCain campaign voodoo economic finally proved too much. During a June 2008 appearance with Joe Scarborough
, he was forced to pretend that "we can afford to extend George W. Bush's tax cuts." And still, he claimed, President McCain could balance the budget in the first term.
Of course, neither of those claims were true, and Douglas Holtz-Eakin knew it. That's why in that rare moment of candor he admitted, "I would like the next president not to talk about deficit reduction."
Unless, that is, the next President of the United States was Barack Obama.