CSPAN - Washington Journal Douglas Holtz-Eakin
Aired: 2025-11-17
Duration: 09:55


=== Affordability Challenges (09:55) ===

[00:00:00]  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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[00:00:23]  And pass precedent denominations.
[00:00:25]  Why are you doing this?
[00:00:26]  This is outrageous.
[00:00:28]  This is a canal clock.
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[00:01:00]  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.
[00:01:09]  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.
[00:01:18]  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.
[00:01:31]  Explain what that means and what are the biggest drivers of that loss in the fourth quarter here.
[00:01:37]  Sure.
[00:01:38]  You know, the government got shut down.
[00:01:40]  People didn't get paid.
[00:01:42]  Some got furloughed.
[00:01:42]  Some continued to work, but they did not get paid.
[00:01:45]  And that's somebody's customer.
[00:01:47]  So they stopped buying things.
[00:01:48]  And that feedback goes through the economy.
[00:01:51]  It diminishes both the production and the purchases of things.
[00:01:56]  And that's about a $28 billion price tag.
[00:01:58]  So it was $9 to $10 billion in direct sort of payroll that didn't go out.
[00:02:04]  And then it gets multiplied through the economy.
[00:02:06]  Now, the recoverable part is that people did want to buy a new couch, say.
[00:02:10]  Maybe they'll buy it in January.
[00:02:12]  That'll show up in the next quarter's GDP.
[00:02:14]  It'll be higher.
[00:02:14]  Because some of the workers are going to get paid at the time that they were furloughed.
[00:02:18]  And so a lot of things just got put off in the fourth quarter and will show up in the first quarter.
[00:02:21]  That's the pattern in past shutdowns.
[00:02:24]  Why are some things unrecoverable then?
[00:02:26]  Well, some things are not durable goods.
[00:02:29]  They are, you know, going out to dinner.
[00:02:30]  There's no good way to recover that.
[00:02:31]  You missed the chance for the birthday party or whatever it might have been.
[00:02:34]  And so you don't get that back.
[00:02:37]  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?
[00:02:47]  So first of all, some perspective.
[00:02:48]  It's a $30 trillion economy.
[00:02:50]  So even $28 billion, which is real money in the real world, is not a dramatic movement in the U.S. economy.
[00:02:58]  So we don't know exactly where we are because of the government shutdown.
[00:03:02]  We haven't received the typical updates on the data, but we know that there's been evidence of softness.
[00:03:07]  Certainly in the labor market, no great evidence of a robust labor market right now.
[00:03:12]  That usually means that there's no great evidence of a robust business sector, and that's a sign of a relatively flat economy.
[00:03:19]  A headline from today's Wall Street Journal, the bond market is headed for its best year since 2020.
[00:03:24]  Is that a good thing or is that a bad thing?
[00:03:26]  It depends if you're holding bonds.
[00:03:28]  If the price of bonds go up and you're holding them, that's a great thing.
[00:03:31]  If you want to buy a bond, then the price goes up, it's a bad thing.
[00:03:34]  So it's like most prices in the economy.
[00:03:36]  It's good news if you own it.
[00:03:38]  It's bad news if you want to buy it.
[00:03:39]  Inflation usually seems like bad news from people and impacting affordability.
[00:03:45]  Where are we on inflation right now?
[00:03:48]  Last measured inflation was about 3% year over year.
[00:03:52]  That's the top-line consumer price index.
[00:03:55]  That's not high inflation by any means.
[00:03:57]  The bad news is we were down to 2.3%, and we've now done a U-turn and we're headed back north.
[00:04:02]  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.
[00:04:10]  Affordability, the key issue, according to polls in the off-year elections.
[00:04:16]  How do you fight the problem of affordability?
[00:04:20]  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.
[00:04:29]  How do you fight the affordability question?
[00:04:32]  I think the first thing is to frame it correctly.
[00:04:35]  Affordability is broadly prices.
[00:04:37]  It's not a single price.
[00:04:38]  And so you do want the Fed to get inflation back to 2%.
[00:04:41]  You don't want to do things that make that harder.
[00:04:43]  And I think the president's job owning of the Fed has not been helpful, but his tariffs have been a real problem.
[00:04:49]  And they're the source of the upward pressure that's going to continue.
[00:04:52]  And so if you wanted to pick one thing, undo the tariffs.
[00:04:55]  I mean, that would be a big help to the Fed.
[00:04:58]  And if you have high prices, in the end, it's always a supply problem.
[00:05:01]  You need more supply.
[00:05:02]  That's how you bring prices down.
[00:05:04]  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.
[00:05:18]  On Friday, the president issued an executive order rolling back tariffs on certain grocery items.
[00:05:24]  Is that an acknowledgment there by the Trump administration that tariffs have real costs for Americans?
[00:05:31]  It was a welcome return to reality on tariffs.
[00:05:33]  I mean, there's been this denial that Americans pay the tariffs.
[00:05:36]  Americans pay the tariffs.
[00:05:36]  They're a tax on imports, and American pays it.
[00:05:39]  And they have an impact on prices.
[00:05:41]  There's no way around it.
[00:05:42]  If it's a consumer good, you add the tariff to the price.
[00:05:45]  Prices are higher.
[00:05:46]  And most of our trade is actually now in intermediate goods.
[00:05:49]  That's a cost of doing business.
[00:05:50]  Businesses pass that along.
[00:05:52]  So we'll see, and they haven't passed all of it along yet.
[00:05:54]  So we will see more upward pressure on prices.
[00:05:56]  The more things change, the more they stay the same.
[00:05:58]  Affordability and inflation were issues that we heard about during the Biden administration.
[00:06:04]  Are there lessons for the Trump administration right now on how the Biden administration tried to address this problem and lower costs for people?
[00:06:12]  I think there are certainly some economic lessons, which is you do need to actually focus on supply.
[00:06:20]  So a classic example is housing is expensive.
[00:06:23]  Let's give people bigger subsidies for housing.
[00:06:25]  That just causes them to buy more housing.
[00:06:27]  And what you need is more supply of houses.
[00:06:29]  And that's how you deal with the affordability.
[00:06:30]  And that takes a lot longer, though, to come to fruition.
[00:06:33]  So you look for quick fixes, and sending checks out is not going to fix anything.
[00:06:37]  The $2,000 dividend tariffs, that's going the wrong direction.
[00:06:41]  That's a very Biden-esque proposal.
[00:06:43]  I wouldn't do that.
[00:06:45]  So, you know, that's one lesson.
[00:06:46]  The second is how you talk about it.
[00:06:49]  Sort of finger-pointing, demagoguing didn't work for the Biden administration.
[00:06:52]  Remember, shrinkflation, greedflation, all sorts of things.
[00:06:56]  In the end, the problem was inflation.
[00:06:58]  Inflation had to be dealt with.
[00:06:59]  And, you know, the Federal Reserve has the job of price stability in the economy, and let them do their job.
[00:07:06]  Douglas Holtz-Aiken is our guest in this segment of the Washington Journal.
[00:07:10]  He's with us until about 8.45 Eastern, another 35 minutes or so.
[00:07:15]  So go ahead and get your calls in.
[00:07:16]  A very good person to chat economic issues with.
[00:07:20]  The American, let me get the numbers out for folks.
[00:07:22]  Democrats, Republicans, Independents, it's 202, 748, 8,000 for Democrats.
[00:07:27]  Republicans, 202-748, 8001.
[00:07:30]  Independents, 202-748-8002.
[00:07:33]  And for folks who don't know what the American Action Forum is, remind them what you do there.
[00:07:39]  We are a center-right think tank.
[00:07:41]  We do domestic and economic policy.
[00:07:44]  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.
[00:07:51]  So we're really trying to keep track of what's going on in the policy world on a daily basis.
[00:07:56]  When it comes to things happening in Congress, the impetus for the shutdown, Democrats putting the cost of health care front and center.
[00:08:03]  Do you think extending the Affordable Care Act subsidies was something that should happen to lower the cost of health care?
[00:08:12]  It's not the cost of health care.
[00:08:14]  It's the cost of an insurance policy that covers the cost of health care.
[00:08:18]  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.
[00:08:25]  We have 310 million Americans and this is about 20 million of them.
[00:08:29]  So the broader health insurance cost problem is not even on the table.
[00:08:34]  And in the end, insurance covers the cost of doctors and hospitals and drugs and devices and all the things that are healthcare.
[00:08:41]  And that's where the money is and that's what we have to control the cost of.
[00:08:44]  A caller earlier said, you can fix this just by going single payer.
[00:08:48]  Let the government be the single payer for health care and that's how you fix this problem.
[00:08:53]  Where are you on that?
[00:08:54]  I think that's the wrong direction to go.
[00:08:58]  The cost of health care is not who writes the check to pay the doctor, it's the cost of the doctor.
[00:09:03]  And we've always focused on insurance and drugs.
[00:09:06]  The money in the American health care system is doctors and hospitals in the end.
[00:09:10]  That's the vast majority of it.
[00:09:11]  And that's the bill we have to cover.
[00:09:13]  So if you were fixing health care costs are, how would you do it?
[00:09:19]  I've been asked this question for 25 years.
[00:09:21]  We still have high costs, so I don't know.
[00:09:24]  No, what you want to do is simple to say and hard to execute on.
[00:09:29]  You want to have the care coordinated.
[00:09:33]  You don't want people running from doctor to doctor to doctor and they don't know what the other one's doing.
[00:09:38]  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.
[00:09:43]  For a long time, we just paid fee for service.
[00:09:45]  You go in, you get paid, and it's an incentive to do more things.
[00:09:48]  If the person's healthy and you get paid, that's the outcome you want.
[00:09:52]  And then you have to have some incentive to do that at a reasonable cost.