A former director of the Congressional Budget Office said the collapse of the super committee created to find $1.2 trillion in federal budget savings offers three lessons.
Douglas Holtz-Eakin is the former budget office director and now is president of the American Action Forum, a Washington, D.C.-based public-policy institute.
Holtz-Eakin said Tuesday that the inability of the congressional committee to complete its assignment showed the importance of White House leadership; the need for tax reform; and that “bad politics continue to lead us to bad policy.”
Holtz-Eakin spoke to a joint gathering of the Association for Corporate Growth North Florida Chapter and the 2011 holiday luncheon of the Otterson Allison Wealth Management Group at Raymond James.
About 140 people attended the event at The River Club Downtown.
Holtz-Eakin said the committee needed “White House leadership.”
“Without the White House leadership, we could not get over the finish line,” he said.
Holtz-Eakin said that entitlement reform and tax reform are crucial.
He said the problems with entitlement spending are in Social Security, Medicare, Medicaid and the health care reform act.
“Our social safety net is broken,” he said. “It’s time to fix it.”
Holtz-Eakin said that if left unchecked, the pressures of entitlement spending “will lead to a broken economy.” He called fixing the programs “a no-brainer.”
Regarding tax reform, Holtz-Eakin detailed how the U.S. corporate income tax rate puts the country at a global competitive disadvantage and that the personal income tax has become “a surtax on higher-income” people.
“It is time for us to have a serious tax reform in the United States,” he said.
Holtz-Eakin said the good news is that the presidential candidates all say tax reform is needed. “The bad news is it’s hard,” he said.
He said that if corporate and personal taxes are cut, then a new revenue source is needed. Asked what that might be, he responded that a carbon tax had the highest probability. A carbon tax is a tax on the carbon content of fuels, or a tax on the carbon dioxide emissions from burning fossil fuels.
“We cannot continue on the trajectory we’re on,” he said.
“The politics have to change, he said.
He outlined the issues of sustained high unemployment, inflation risks and a generation of young people with higher unemployment and taxes but receiving fewer services. He said “that breeds a cranky electorate.”
There was another side, however. Holtz-Eakin said he expects an economic recovery, including a more rapid recovery in the housing and automotive industries.
“I’m not worried about a double-dip” recession, he said.
“There’s nothing left to go wrong.”
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