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Former CBO Director Douglas Holtz-Eakin on the latest dealings on Capitol Hill ahead of the fiscal cliff.
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2000 Douglas Holtz -- he's the former Congressional Budget Office director president of the American action form.
Doug great to have you with this and -- little hope what do you make of those folks.
I mean they're brought after Grover Norquist they're throwing their pledges out I love senator workers and holding his -- -- -- I think he has somebody have to -- how that -- I think honestly this is politics or economic common sense on what we know a couple of things and number one.
We've already got some tax increases coming out that Health Care Reform -- -- care and tax increases and it on the wealthy and so.
On the you know they're coming no matter what to they are bad idea in this weak economy and ever -- should -- that.
And number three the president who claims he wants it to the have a balanced approach has only talks are raising taxes they should be asking the president -- question.
What spending cuts are you offering along with this request for tax increases and -- -- -- -- -- plan.
That's the discussion need to have -- negotiating with -- yourself in public on taxes.
And -- John Boehner sort of the speaker of the house has been relatively well he's certainly -- -- -- -- from.
It seems that somehow the preferred course to watching.
Senators Graham.
And McCain and Chambliss for crying out loud.
-- out there making all sorts of -- Well I mean that's the needed does love to cover them and and that's because in the end are complaining about -- -- -- -- they make good I don't know forgot I I get that -- but in the end.
You know what's really going on as John Boehner Mitch McConnell Nancy Pelosi Harry Reid and not the White House.
Are going to have to get to a deal that's -- going very slowly little progress as we wandered toward the fiscal cliff but.
Those are that the players that matter the noise from off fund the -- shows us just being -- -- -- to cover at the moment.
Is there.
Let me ask you this if you see any reason in this this possibility.
That is that the president is actually insisting on tax cuts on the wealthy even even though he understands certainly -- is a Smart man.
That he's talking about eight and a half days of money with which to run this government.
-- it is he -- do you think there may be the the the possibility.
That this is simply -- If you will an opportunity for him to.
Then bring forward entitlements and say look -- just stuck it to the rich now we're going after the real money.
Well I think the president does know that he needs it to get that -- is part of pop as part of the politics.
I think they also understand that if there isn't real progress made on the debt and the entitlement spending is the source of that debt going forward.
That -- rating agencies are gonna downgrade the US by August of next year so they have a window in the spring of 2013 where they need to get something serious done.
I think.
That's the place to have this larger discussion.
I think the problem -- dragging into the fiscal cliff negotiations is.
You raised the possibility did you know he -- train wreck we go over the cliff wind up and recession.
Just going through.
The real concerns here.
One is the markets are not gonna wait in my judgment at least -- until next summer to react.
As a matter -- -- these markets hold -- reacting for another thirty days without him demonstration.
You know -- or your work there will be America.
-- -- That.
That what -- this president is suggesting in terms of and I don't.
I wouldn't be put forward.
Is assigned to salve those anxious investors in these markets from debt markets equity markets.
To.
For foreign exchange -- I mean that's asking a lot isn't.
Well I think there're there are two things market should fear I'm number one they should fear going over the fiscal cliff and they do I mean you know when issued the dividend taxes go from fifteen to almost 45.
That's bad news for market participants and they're going to react poorly to that so.
Not having these sharp tax increases and spending cuts getting through that end of the year cliff is very important for the markets.
And in doing so you have to make a commitment as well to take on the second problem the large debt.
And that's that's dance that -- president and the commissioners are gonna have to -- to how they're gonna do that because.
We need both problems fixed.
If you try to do too much on the debt lame duck I'm afraid you don't.
I get a deal -- -- the fiscal cliff and if you do too much from debt reduction big tax increases.
You know we have a recession so.
That this is economically pretty straightforward but politically very complicated.
And the results profound looking and his -- -- -- as one and a half percent.
Some say a reduction in GDP if we pursue this mad course that were on.
-- -- we have a president who insists that taxes on the wealthy will be a solution.
And if we have Republican.
Leaders are who are saying that they can join and an increase in taxes were about talking about.
The spending problem.
Somehow they forgot about the spending -- -- you have to focus on the spending problem you know again.
We have prominence.
People like Warren Buffett writing op ads that say the solution here -- we need to tax -- -- do right away.
And in fact those proposals -- no problem.
They're less than a week of running the government is just a couple of days -- they they make the tax -- complicated and they don't just solve the fiscal left so.
That but that's the kind of thought leadership we have at the moment.
Terrifying -- figures -- were there would come to mind that I I don't I don't upset anybody Douglas -- anything good to have you with us thank you.
