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Nov. 17, 2025 15:25-15:35 - CSPAN
09:55
Washington Journal Douglas Holtz-Eakin
Transcriber: nvidia/parakeet-tdt-0.6b-v2, sat-12l-sm, and large-v3-turbo Source
Participants
Main
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douglas holtz-eakin
05:48
Appearances
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john mcardle
cspan 03:05

Speaker Time Text
Affordability Challenges 00:09:55
unidentified
Speaker Mike Johnson announced plans to schedule a floor vote after 218 members signed a discharge petition, enough to force the House to action on the bill.
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douglas holtz-eakin ▲ ● ▼
And pass precedent denominations.
unidentified
Why are you doing this?
This is outrageous.
This is a canal clock.
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john mcardle ▲ ● ▼
For former Congressional Budget Office Director, current American Action Forum President Douglas Holtz-Akin is back with us now for a focus on all things U.S. economy.
Mr. Holt-Aiken, I want to start with the Congressional Budget Office and its projections about the cost of the longest shutdown in U.S. history.
The urban shutdown cost the government, according to U.S. fourth quarter GDP reduction, some $28 billion, with maybe $14 billion of that considered unrecoverable.
Explain what that means and what are the biggest drivers of that loss in the fourth quarter here.
douglas holtz-eakin ▲ ● ▼
Sure.
You know, the government got shut down.
People didn't get paid.
Some got furloughed.
Some continued to work, but they did not get paid.
And that's somebody's customer.
So they stopped buying things.
And that feedback goes through the economy.
It diminishes both the production and the purchases of things.
And that's about a $28 billion price tag.
So it was $9 to $10 billion in direct sort of payroll that didn't go out.
And then it gets multiplied through the economy.
Now, the recoverable part is that people did want to buy a new couch, say.
Maybe they'll buy it in January.
That'll show up in the next quarter's GDP.
It'll be higher.
john mcardle ▲ ● ▼
Because some of the workers are going to get paid at the time that they were furloughed.
douglas holtz-eakin ▲ ● ▼
And so a lot of things just got put off in the fourth quarter and will show up in the first quarter.
That's the pattern in past shutdowns.
john mcardle ▲ ● ▼
Why are some things unrecoverable then?
douglas holtz-eakin ▲ ● ▼
Well, some things are not durable goods.
They are, you know, going out to dinner.
There's no good way to recover that.
You missed the chance for the birthday party or whatever it might have been.
And so you don't get that back.
john mcardle ▲ ● ▼
If the shutdown does mean a softening in the U.S. economy in the fourth quarter, where does that leave us in January, one year into the second Trump administration?
douglas holtz-eakin ▲ ● ▼
So first of all, some perspective.
It's a $30 trillion economy.
So even $28 billion, which is real money in the real world, is not a dramatic movement in the U.S. economy.
So we don't know exactly where we are because of the government shutdown.
We haven't received the typical updates on the data, but we know that there's been evidence of softness.
Certainly in the labor market, no great evidence of a robust labor market right now.
That usually means that there's no great evidence of a robust business sector, and that's a sign of a relatively flat economy.
john mcardle ▲ ● ▼
A headline from today's Wall Street Journal, the bond market is headed for its best year since 2020.
Is that a good thing or is that a bad thing?
douglas holtz-eakin ▲ ● ▼
It depends if you're holding bonds.
If the price of bonds go up and you're holding them, that's a great thing.
If you want to buy a bond, then the price goes up, it's a bad thing.
So it's like most prices in the economy.
It's good news if you own it.
It's bad news if you want to buy it.
john mcardle ▲ ● ▼
Inflation usually seems like bad news from people and impacting affordability.
Where are we on inflation right now?
douglas holtz-eakin ▲ ● ▼
Last measured inflation was about 3% year over year.
That's the top-line consumer price index.
That's not high inflation by any means.
The bad news is we were down to 2.3%, and we've now done a U-turn and we're headed back north.
That's an uncomfortable position for the Fed, which has a target of 2%, wanted to get back to 2%, and has now lost ground on that battle.
john mcardle ▲ ● ▼
Affordability, the key issue, according to polls in the off-year elections.
How do you fight the problem of affordability?
We spent the first hour of this program today asking yours for their suggestions and what the government could do to help them lower prices or help lower prices for them.
How do you fight the affordability question?
douglas holtz-eakin ▲ ● ▼
I think the first thing is to frame it correctly.
Affordability is broadly prices.
It's not a single price.
And so you do want the Fed to get inflation back to 2%.
You don't want to do things that make that harder.
And I think the president's job owning of the Fed has not been helpful, but his tariffs have been a real problem.
And they're the source of the upward pressure that's going to continue.
And so if you wanted to pick one thing, undo the tariffs.
I mean, that would be a big help to the Fed.
And if you have high prices, in the end, it's always a supply problem.
You need more supply.
That's how you bring prices down.
So focusing on, like, what people are buying and the president's, like, you know, most of the nation drug pricing or 50-year mortgages or all those things which are meant to manipulate a particular price, what you want is to have a broad agenda to increase supply and availability in need.
john mcardle ▲ ● ▼
On Friday, the president issued an executive order rolling back tariffs on certain grocery items.
Is that an acknowledgment there by the Trump administration that tariffs have real costs for Americans?
douglas holtz-eakin ▲ ● ▼
It was a welcome return to reality on tariffs.
I mean, there's been this denial that Americans pay the tariffs.
Americans pay the tariffs.
They're a tax on imports, and American pays it.
And they have an impact on prices.
There's no way around it.
If it's a consumer good, you add the tariff to the price.
Prices are higher.
And most of our trade is actually now in intermediate goods.
That's a cost of doing business.
Businesses pass that along.
So we'll see, and they haven't passed all of it along yet.
So we will see more upward pressure on prices.
john mcardle ▲ ● ▼
The more things change, the more they stay the same.
Affordability and inflation were issues that we heard about during the Biden administration.
Are there lessons for the Trump administration right now on how the Biden administration tried to address this problem and lower costs for people?
douglas holtz-eakin ▲ ● ▼
I think there are certainly some economic lessons, which is you do need to actually focus on supply.
So a classic example is housing is expensive.
Let's give people bigger subsidies for housing.
That just causes them to buy more housing.
And what you need is more supply of houses.
And that's how you deal with the affordability.
john mcardle ▲ ● ▼
And that takes a lot longer, though, to come to fruition.
douglas holtz-eakin ▲ ● ▼
So you look for quick fixes, and sending checks out is not going to fix anything.
The $2,000 dividend tariffs, that's going the wrong direction.
That's a very Biden-esque proposal.
I wouldn't do that.
So, you know, that's one lesson.
The second is how you talk about it.
Sort of finger-pointing, demagoguing didn't work for the Biden administration.
Remember, shrinkflation, greedflation, all sorts of things.
In the end, the problem was inflation.
Inflation had to be dealt with.
And, you know, the Federal Reserve has the job of price stability in the economy, and let them do their job.
john mcardle ▲ ● ▼
Douglas Holtz-Aiken is our guest in this segment of the Washington Journal.
He's with us until about 8.45 Eastern, another 35 minutes or so.
So go ahead and get your calls in.
A very good person to chat economic issues with.
The American, let me get the numbers out for folks.
Democrats, Republicans, Independents, it's 202, 748, 8,000 for Democrats.
Republicans, 202-748, 8001.
Independents, 202-748-8002.
And for folks who don't know what the American Action Forum is, remind them what you do there.
douglas holtz-eakin ▲ ● ▼
We are a center-right think tank.
We do domestic and economic policy.
And the niche that we try to fill is, let's write in English for non-specialists and cover the things that are happening in Congress or the agencies.
So we're really trying to keep track of what's going on in the policy world on a daily basis.
john mcardle ▲ ● ▼
When it comes to things happening in Congress, the impetus for the shutdown, Democrats putting the cost of health care front and center.
Do you think extending the Affordable Care Act subsidies was something that should happen to lower the cost of health care?
douglas holtz-eakin ▲ ● ▼
It's not the cost of health care.
It's the cost of an insurance policy that covers the cost of health care.
So what's missing in this debate is, A, as a sense of perspective, this isn't all the subsidies and it's not all the health insurance.
We have 310 million Americans and this is about 20 million of them.
So the broader health insurance cost problem is not even on the table.
And in the end, insurance covers the cost of doctors and hospitals and drugs and devices and all the things that are healthcare.
And that's where the money is and that's what we have to control the cost of.
john mcardle ▲ ● ▼
A caller earlier said, you can fix this just by going single payer.
Let the government be the single payer for health care and that's how you fix this problem.
Where are you on that?
douglas holtz-eakin ▲ ● ▼
I think that's the wrong direction to go.
The cost of health care is not who writes the check to pay the doctor, it's the cost of the doctor.
And we've always focused on insurance and drugs.
The money in the American health care system is doctors and hospitals in the end.
That's the vast majority of it.
And that's the bill we have to cover.
john mcardle ▲ ● ▼
So if you were fixing health care costs are, how would you do it?
douglas holtz-eakin ▲ ● ▼
I've been asked this question for 25 years.
unidentified
We still have high costs, so I don't know.
douglas holtz-eakin ▲ ● ▼
No, what you want to do is simple to say and hard to execute on.
You want to have the care coordinated.
You don't want people running from doctor to doctor to doctor and they don't know what the other one's doing.
So you want to have some sort of coordination of the care and you want to pay for outcomes, not for doing things to people.
For a long time, we just paid fee for service.
You go in, you get paid, and it's an incentive to do more things.
If the person's healthy and you get paid, that's the outcome you want.
And then you have to have some incentive to do that at a reasonable cost.
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