I Want Douglas Holtz-Eakin Back in Government

A surprisingly large number of people are really pissed off at the Council on Foreign Relations for plucking Douglas Holtz-Eakin out of the Congressional Budget Office.

Here David Wessel compares Doug to Jeremiah:

WSJ.com - Capital : To a Seer, It's Clear: Budget Will Buckle Under Health Costs: Like the prophets of the Old Testament, directors of the Congressional Budget Office tell unpleasant truths that Americans and their leaders don't always want to hear. After two years in the Bush White House and three as CBO director, economist Douglas Holtz-Eakin is now freshly out of government and perched at the Council on Foreign Relations. As the annual federal-budget drama opens in the U.S. -- with its political posturing, mind-numbing arguments and bickering over million-dollar fish in a trillion-dollar sea -- a conversation with the plain-spoken Mr. Holtz-Eakin seems timely.

Despite what you may hear in the weeks ahead, the important fiscal issues aren't how much the government will spend next year or how big the deficit will be the year after, he says. "Beyond five years, no matter what choices you make in the interim, you face Social Security, Medicare, retirement income, medical care and long-term care. More generically, how will we support the old-age needs of retirement income, medical care and long-term care? We're going to have a whole bunch more old people. And current programs aren't sustainable. The long-term issue is reimagining and reinventing our programs for older people so that they don't kill us. And then, putting in place a real tax system that will support the government once it makes those decisions. It really has to be done in order."

That's not news to budget geeks, but politicians act like they don't get it, perhaps because the public doesn't believe it. Americans do care about this, says Mr. Holtz-Eakin, who has spent a lot of time speaking to Rotary Clubs and the like. "But they don't have a whole lot of time to sit and study these things, so there's a fairly limited sophistication. I'd go out and say things that I think are sort of obvious and they look at me like I'm nuts."

Like what? "The thing that I found most amazing is everybody thought the war in Iraq was a much bigger expenditure than the [Medicare] drug benefit. How could you possibly believe that? The war in Iraq, $6 [billion] to $7 billion a month, maybe $70 billion, $75 billion, a year, something like that. And the drug benefit is forever."

So how did he describe it so citizens would get it? "The demography is pretty predictable," he says. "People get older one year at a time. Then you layer on historical trends in health-care spending. If you just take demography plus history as your guide, Medicaid and Medicare are as big in 2050 as the entire federal government is today. And then you say, 'Oh, my God, that just can't be.' So either we're going to have a really big government, and you have to have a tax system that can support a big government. Or, no, we need to have a smaller government, and we're going to make those programs support the right people at the right levels."

"I think this is self-evident," says Mr. Holtz-Eakin, chuckling. "But I realize now this is the price of being too close to the process. I wake up every morning saying it doesn't matter what happens in the next five years, and people say I am really weird."

Of course, CBO directors have been preaching this message since the agency was founded in 1974, and they've occasionally seen results. But the political system appears paralyzed today. "I understand people who think: The political system doesn't reward painful choices. We'll never do this, and we're toast. And you try to reconcile that with a history where in fact we have done these things," Mr. Holtz-Eakin says. "I don't have a defining vision of how it happens. I just know that it does sometimes."

Even though he no longer has to answer to political masters, Mr. Holtz-Eakin won't join those who argue the Bush tax cuts were a mistake, or at least were too big. But forget the notion that somehow the U.S. economy will grow fast enough so we don't have to wrestle with health-care and retirement-spending trends. "I don't know how to quantify how implausible I think that is," Mr. Holtz-Eakin says.

So how and when does something happen? "One theory is that it takes a crisis," he says. "A second way to do it is ingenious political leadership. That's what we're waiting for. There's a point where, for some politician, it will be better to fix it than to let it happen. I don't know when that is. But given how fast health-care costs are going up, that phenomenon will be the driving one."

Heed the prophet.