Report from the Duel of Economic Advisors

I spent my lunch hour at the Urban Institute today, listening to Obama econ advisor Austan Goolbee debate McCain econ advisor Doug Holtz-Eakin on the candidates' tax plans. Here's an Iphone photo showing, from left to right: Len Burman (director of the Tax Policy Center), Holtz-Eakin, Goolsbee, and Robert Reischauer (president of the Urban Institute).



You can download an mp3 of the event here.

No pistols were drawn, and no punches were thrown, but Holtz-Eakin did look worse for wear by the end of it. First, Burman gave a fairly dry summary of the Tax Policy Centers (TPC) latest analysis of the plans. Then Goolsbee gave what I thought was a devastating presentation, chiefly a summary of the highlights of Jason Furman's latest critique of the McCain proposal. (This critique is based on the TPC's most recent numbers). I could see why Goolsbee was a debate champion in his student days. He sat a couple feet from Holtz-Eakin, and with passion and precision explained why the tax plan Holtz-Eakin was there to represent was complete BS.

He framed his presentation by saying that there were three problems with the Bush tax program:

1. It was fiscally irresponsible, creating a huge sea of red ink.
2. It was sold using budget gimmickry.
3. It was massively tilted toward the rich.

On all three points, he showed that the McCain program is worse. In his words, it would create deficits that are twice as big and is twice as regressive.

One of his strongest points was when he said (paraphrasing), if we take McCain at his word and accept that he's going to implement all the tax cuts he's calling for AND his promise to balance the budget by 2013, the only possible conclusion is that he will have to cut Social Security and Medicare by 60%, all but dismantling the programs.

He also highlighted the fact that the headline analysis by the TPC, which is based on Holtz-Eakin's representation of McCain's proposals, doesn't even include another $2.8 trillion of lost revenue (over ten years) for the policies that McCain has in his stump speech. During the Q&A, Holtz-Eakin objected to this figure, until Goolsbee showed him that it appears in an addendum table (R4) to the TPC analysis.

Goolsbee practically begged the assembled crowd of policy geeks and journalists to call out the campaign on the complete insanity of the McCain proposals. He said (paraphrasing again) that if the ludicrous McCain proposals are accepted as a serious plan, no one will offer a meaningful campaign tax proposal ever again.

When Goolsbee wrapped up, there was a moment of silence as the audience held its collective breath, wondering how Holtz-Eakin would respond. Would he actually defend the indefensible? Or would he break down into tears and beg forgiveness? Coat his body in tax tables and light himself on fire? Or run out of the room screaming, "I can't take it anymore, all the lies, all the evil! I just want to go home to academia!"

Instead, Holtz-Eakin said, well, "Taxes aren't everything" (actual quote, at a debate on tax policy) and talked up McCain's proposals on the environment and renewable energy. Rather than make any attempt to rebut Goolsbee's takedown, he argued that reducing taxes increases growth and that the spending side needs to be considered as well. Of course it was pointed out that there is no evidence that tax cuts financed by deficits do anything for growth, and that McCain hasn't identified any major spending cuts beyond some pocket change from earmarks and vague "entitlement reform." Somehow, Holtz-Eakin managed to get away without offering any counter to Goolsbee's critique.

At the end, Burman announced that Goolsbee and Holtz-Eakin will be back for a rematch, with another forum to talk about the spending side of the equation at some point before the election. I'll be there!

Correction: In the original version of this post I saidthat the extra cost of McCain's plans, above and beyond Holtz-Eakin's representation of the proopsals, would be $2.8 trillion over four years. I was misreading the relevant table--it's $2.8 trillion over TEN years, and I have corrected the post to reflect this.