TOPICS > Economy

Debating Obama’s Vision for the U.S. Economy

January 25, 2012 at 12:00 AM EDT
In his State of the Union Address Tuesday night, President Obama spoke about his economic goals for the country. Gwen Ifill discusses the broader points, including fairness, taxes and American manufacturing, with Heather Boushey of the Center for American Progress and Douglas Holtz-Eakin of the American Action Forum.

GWEN IFILL: And, finally, we are going to turn to the president’s broader view of the economy and some of the ideas he laid out last night.

For that, we check in with a pair of economists with very different political points of view. Heather Boushey is a labor economist at the Center for American Progress, a liberal think tank here in Washington. And Douglas Holtz-Eakin is an economist and former director of the Congressional Budget Office. He’s now president of a conservative policy group called the American Action forum.

So, Heather Boushey, is the state of the union getting stronger, as the president said?

HEATHER BOUSHEY, Center for American Progress: Well, certainly, it’s stronger than the day he took office.

When the president took office, we were losing jobs at the pace of about 20,000 a day. We’ve certainly pulled out of that, and now we’re seeing job creation month after month. Now, I’d be the first one to tell you that it’s not enough jobs. We certainly need to do better. But certainly it’s in a much stronger state than it had been.

GWEN IFILL: What do you think about that, Doug Holtz-Eakin?

DOUGLAS HOLTZ-EAKIN, former Congressional Budget Office director: Well, I think what we saw the president do is make an excellent case for his campaign, but he didn’t really talk about the state of the union.

And I think most people who watched last night and came away disappointed were in fact most disappointed by that gap, the fact that the rhetoric was closer to campaign rhetoric, an undertone of finger-pointing and blame, the problems not discussed the most important problems that we face, the large debt we have at the moment, projected to grow even larger, the sources of that debt, the entitlement programs that genuinely need to be reformed, and the fact that the deep fairness issue were not the fairness issues that he chose to highlight, but the fact that we have a social safety net that will not survive to the next generation of poor and elderly, and that, in the process of it failing, we will burden the federal government with red ink and the economy a potential failure.

And that’s what we’ll saddle our children with. That’s the preeminent moral issue of this day. That’s the state of our union, and the president is running for reelection.

GWEN IFILL: Heather Boushey, you just heard the yardsticks which Doug Holtz-Eakin put out there, including about — questions about the death and the social safety net. What are your yardsticks about that, whether the president is correct or not to measure that against?

HEATHER BOUSHEY: Well, I think that one the great things about the speech last night is that the president was hammering home the message that the middle class is the engine of growth, and that, you know, he has a plan, a very sort of practical plan that he laid out last night to put the support and strength of the middle class at the front of our economic vision.

And so it is true that we have been through a very rough patch here. We have had this great recession. We have had an economy that failed in many ways over the past decade. And he’s trying to reverse those policies and put us on a stronger path. So the kinds of things that he’s implemented and that the previous Congress put into action over the past few years are moving us forward in that direction.

GWEN IFILL: Let’s walk through some of the claims the president has made.

He has said many times, his administration has said that were it not for government intervention, the auto industry would have come to naught. Why is that not so? Why was that not a good thing, what the administration did. . .

DOUGLAS HOLTZ-EAKIN: I think that the key is, number one — and it’s reflective in the president’s speech last night — is a very backward-looking view of the world.

We’re worried about our future and we’re worried about the people who don’t have jobs and how they’re going to find them and how our children will be educated. And he’s building an economy built to last, but it’s built on a vision of the past, a vision of big government and high taxes and big unions.

And the policies that he’s talking about, the ones that are supposedly going to help us, are both internally inconsistent — I think a big problem with the speech — and built on. . .

GWEN IFILL: Can I just ask you specifically about the auto industry again?


So, what he said was no bailouts. They got a bailout. The taxpayers are still on the hook for tens of billions of dollars to GM and Ford. They did, in fact, go through bankruptcy. It’s not that, had they not bailed them out, they would have gone through a bankruptcy that they avoided. They didn’t avoid it. So they got the pain.

We have whole divisions of GM that are gone. Those people are out of work. They got a bailout. And somehow he’s claiming he saved the American auto industry. Ford got no money. Hyundai has never laid off a worker in the United States. Toyota, the Honda Civic factories — there’s an American auto industry that he never touched.

So the claim is exaggerated, and it doesn’t reflect what actually happened.

GWEN IFILL: Let me ask you to respond to that. But I also want to ask you about job creation. That’s another big claim which this administration makes, and says it is future-oriented when it talks about that with some of these proposals last night.

HEATHER BOUSHEY: Well, you know, certainly the reverse of what happened in the auto industry was an enormous success. They pulled them back from the brink. And now they’re hiring folks again, and that’s a great thing.

Now, one of the things that the president did in his speech that was I think forward-looking was that he focused on manufacturing. Out of the box, he said you know, we need to focus on making sure that we make stuff here in America and that we’re supporting that industry.

And I certainly disagree with Doug, that that is a forward-looking agenda. We need to be a country that again focuses on policies that support the kinds of businesses that make things. We can not have an economy that’s just built on finance alone. That was the kind of economy that got completely out of control in the 2000s, that led to the disaster that we had in the economy over the past couple of years.

So, I think that that focus on making sure that we have a strong manufacturing base and that we support innovation and industries here in the United States. . .

GWEN IFILL: Let’s talk about tax policy, because the president said there would be a payroll tax extension. I want to know whether you think that’s true. He also made the comment that we just were discussing about the Buffett rule, which was on finding a way to make the tax code flatter.

Let’s start by talking about the payroll tax. There was bipartisan applause. People were nodding. But it seems to me like the devil’s in the details once again.

DOUGLAS HOLTZ-EAKIN: So I don’t think there’s any disagreement that we need to extend the payroll tax for a full year.

What has been the source of disagreement is the way in which you do it without raising the deficit. I expect those differences to get ironed out. This is fundamentally a political issue.

GWEN IFILL: Do you agree with that?

DOUGLAS HOLTZ-EAKIN: . . . settle it. It’s very important.

HEATHER BOUSHEY: Well, I hope that they get ironed out.

And I think that one thing that the president didn’t talk about last night that is typically paired with the payroll tax cut is the extension of benefits to the long-term unemployed. So, we still continue to have record high numbers of people who have been out of work and searching for a job. And so, as you said, the devil’s in the details.

Now, and — but I do hope that they continue to think of unemployment insurance as a piece of that.

DOUGLAS HOLTZ-EAKIN: If we could go back to the tax policy…

GWEN IFILL: Go ahead. That is what I was going to ask you.

DOUGLAS HOLTZ-EAKIN: This is, I think, where the rhetoric and the reality don’t add up in the speech.

So, the president says, I want tax reform. It’s imperative we have a tax code that’s fair. We need tax reform. Most people believe tax reform means lower rates, broader base, simpler code, everyone has to pay their share.

Then look through the speech and ask, OK, where’s the strategy for that? Well, over here, we’re going to have a Buffett rule, not well-defined, not really consistent with the facts on the ground about who pays what. Over here, we are going to have a new tax for multinationals, not very well-defined, at odds with every other country successful in the globe. I’m going to have some special favors for these manufacturing firms who create jobs here. These high-tech manufacturing jobs get a double break because. . .

GWEN IFILL: So you’re saying he’s making the tax code more complicated, rather than. . .

DOUGLAS HOLTZ-EAKIN: At every step and consistent with who he thinks deserves money and doesn’t. That’s not the way America succeeds.

GWEN IFILL: Heather Boushey.

HEATHER BOUSHEY: Well, certainly at least on the personal income tax frame, I think he’s been very clear that he wants to make sure that the wealthy pay their fair share.

And the Buffett rule, making sure that people that earn more than a million dollars pay a minimum tax, that’s certainly — there’s a lot of clarity there. And there’s been support for that among Democrats for quite some time, making sure, as he said, that everybody gets a fair shot and that people pay their fair share.

GWEN IFILL: The president also talked briefly about housing concerns last weekend. And he talked — he made a proposal that there ought to be a way for people to refinance their mortgages. But there wasn’t a lot of detail.

Do you understand — did you get any sense of what that was about?

HEATHER BOUSHEY: I don’t think we have a lot of detail yet. I haven’t seen a lot of detail coming out yet.

But my understanding is that there’s a lot of folks out there who want to refinance, take advantage of these really low rates, but can’t because they don’t have that 20 percent down in their home. And my understanding is that the plan is designed to help those folks be able to take advantage. . .

GWEN IFILL: It’s government money.

HEATHER BOUSHEY: I don’t know all the details on it, yeah.

GWEN IFILL: What do you think about that?

DOUGLAS HOLTZ-EAKIN: I think he said two things last night, one of which was empty politics, one of which I think could be damaging.

The refinancing looks empty. They say the budget cost is going to be about $10 billion. There’s a $700 billion hole in the housing market — $10 billion is nothing. I think that was good political positioning. It won’t make much difference.

He also created a task force, as if we didn’t already have an FBI, Department of Justice and SEC, a million state attorney generals. And he did it as a moment when we were finally seeing the state attorney generals and the servicer industry come to an agreement, and basically say we’re going to put this behind us. We’re going to agree on our liability. The A.G.s were going to stop their prosecution.

This gets in the way of that process. It means we don’t put our housing market policies behind us. We prolong them. And I think it could actually be very damaging for the recovery.

GWEN IFILL: After tomorrow — last night, briefly, closer to agreement on any of these things or farther away, Heather Boushey?

HEATHER BOUSHEY: Closer to agreement between. . .

GWEN IFILL: On any of the proposals the president put out there.

DOUGLAS HOLTZ-EAKIN: Between Heather and I.

HEATHER BOUSHEY: Between us? Somehow, I doubt that.


HEATHER BOUSHEY: You know, I think it’s interesting.

The State of the Union is of course a speech to Congress. And this Congress has been incredibly challenging for this president. They have not agreed to do any of the things that he put on the table over the past year, and, importantly, none of the things to focus on job creation.

GWEN IFILL: Briefly?

DOUGLAS HOLTZ-EAKIN: Most disappointing thing to me, some of the things we saw last night were three years old, which means they didn’t go through when the Democrats controlled all of Congress. They’re certainly not going to go through now.

GWEN IFILL: Doug Holtz-Eakin, Heather Boushey, thank you both very much.