Top Economic Advisers’ Debate Underscores Wide Differences

In a Nov. 9 debate at the National Press Club, five top economic advisers to major presidential candidates of both parties squared off on how best to address the most challenging economic issues that will face the next administration. 

On some key issues the differences were striking and throughout the two hours, responses came at a fast clip and were to the point.  Topics that drew the most attention included recession risks, tax policies, health care, and energy policies.

It was NABE’s first sponsorship of an election debate.  The large turnout and news media coverage indicates it was a welcomed opportunity to highlight economic policies that already are under scrutiny as the accelerated presidential election cycle swings into high gear.  The first presidential primaries are in early January and by March, several states will have voted in both Republican and Democratic primaries.

NABE President Ellen Hughes-Cromwick, chief economist, Ford Motor Company, welcomed debaters and an audience of more than 200 people who were assembled in the press club’s main ballroom.  “It is our hope that this program will broaden our understanding of the candidates’ economic policy proposals in a way that is deeper than what we might hear on the campaign trail,” she said.

The economic advisers participating in the debate were:  Gene Sperling, adviser to Hillary Clinton; Leo Hindery, adviser to John Edwards; Michael Boskin, adviser to Rudolph Giuliani; Douglas Holtz-Eakin, adviser to John McCain; and Austan Goolsbee, adviser to Barack Obama.  [Advisers to Republican candidates Mitt Romney and Fred Thompson were invited, and they declined to attend.]

Moderators Judy Woodruff, the Newshour with Jim Lehrer, and David Wessel, the Wall Street Journal, started by asking each of the advisors to share their assessments of the U.S. economy.   Woodruff put the question in the context of testimony given Nov. 8 by Federal Reserve Chairman Ben Bernanke, in which he raised risks in the housing market and concerns about inflation.

Risks Seen in Broad Economic Outlook

Advisers to both Republican and Democratic candidates found fault with Bush administration policies and they agreed that the risks of recession have grown in recent months as the subprime mortgage crisis has crippled the housing market and spread to other sectors.  “There is no reason to celebrate the current status of the economy,” said Holtz-Eakin, adding that McCain is “concerned about the outlook for the economy.”

Hindery said that as he and Edwards look at the latest economic indicators, they are most struck by what he called “a middle class crisis” that reflects jobs lost to highly competitive trade in many sectors, as well as other factors. “If I go through the litany of problems and ask if we are better off than we were eight years ago, by any measure, the answer must be ‘no.’,” Hindery said.

Boskin of the Giuliani campaign said that while he is concerned about the housing sector and slower overall growth, he expects the economy to avoid recession given its resilience and strength outside of housing.  “There are certainly pockets of distress...but there are many good signs.  It is clear the economy will be struggling for the next couple of quarters,” he said.  His greatest concerns are in policies that might increase tax rates.

Long-Term vs. Short-Term Solutions

Sperling said that Clinton is worried about the subprime mortgage crisis and housing market slump, combined with rising energy prices.  “Problems we face right now speak to what should be the fundamental goal of a president—which should be laying the foundation for economic growth and shared prosperity,” he said.  He cited growing income disparity and a need to address energy prices and rising health care costs as among the most critical issues facing the next president.

Goolsbee also emphasized what he called a much-needed focus on long-term solutions, especially when it comes to health care, the nation’s infrastructure, and education.  Obama wants to focus on “stagnant incomes, for all but those at the very top, coupled with rising costs on a large number of necessities,” he said. Combined, these two trends have resulted in income and social mobility becoming “highly restrictive for a large segment” of the U.S. population, he said.

Wide Differences on Tax Policies

Boskin said he expects tax policy proposals to be among the most important in the campaign.  “We have over a three trillion-dollar tax increase on the books right now,” he said, referring to scheduled expiration of several tax reduction provisions.  “We face a fundamental choice.  There is no example of a large, complex economy that has done well with higher tax rates,” he said.  Guiliani’s major concern is that tax rates will be allowed to increase as Congress and a new administration decide whether to allow several current tax reductions to expire in about two years. 

Under Clinton’s proposals, “the overwhelming bulk of tax cuts would be extended because in this state of the economy this is necessary,” Sperling said.  Clinton would also propose new tax cuts that would help to provide health care for those currently not covered, retirement plan incentives, and reforms that would support education, he said.  “Everybody would benefit from extension of middle-class tax cuts. The question is should we be giving an extra $120 billion a year to people in the top 1 percent at a time when we have 47 million people who are not covered” by health insurance and the nation has a savings crisis, he asked.
 
Holtz-Eakin underscored that “tax policy begins with spending.”  The next president will have to work with Congress “to get control of spending,” he said.  Low tax rates should continue on capital gains and other provisions that support economic growth, “but it will be enormously costly if we keep the tax code the way it is now,” he said.  McCain is committed to eliminating the alternative minimum tax.

Goolsbee said that Obama has called for “direct middle-class tax relief in the form of cutting the payroll tax,” an approach that he said has been ignored as Congress and the White House debate income tax cuts.  A country’s tax code reflects a “society’s values and our values in our tax code makes it look like we value special interests and not working people,” he said.  

Media Coverage Extensive

NABE press officer Melissa Golding reported that 33 journalists from the following news outlets attended the debate: Bloomberg News, Bloomberg Radio, Washington Trade Daily, Dow Jones, the Associated Press, MarketWatch, Nightly Business Report, Barron’s Weekly, the Christian Science Monitor, Cox News, Jiji Press (Japan), the Detroit Free Press, the Washington Post, Kiplinger Washington Letter, Kyodo News (Japan), the Wall Street Journal, Market News International, Capital News Service, the Asahi Shimbun (Japan), Reuters, Financial Week, Housing Market Report, Fox Business Channel, Tax Notes, BNA’s Daily Labor Report, and Gannett News Service.

Also, Hughes-Cromwick was interviewed by XM Satellite Radio’s 2008 Election Channel before the debate, and the channel carried the debate live on the radio and over the Internet. C-SPAN carried it live on C-SPAN 3, and broadcast tape of the event later that day, over the weekend that followed it, and beyond.  CNN tapped into C-SPAN’s live feed of the debate, and camera crews from CNBC/NBC, Bloomberg TV, NHK (Japan), Fox Business Channel, the Machinists’ Union, and Nightly Business Report recorded portions of the debate for broadcast. Among the articles published Nov. 10 was a story on the front page of the Washington Post’s Business Section.

For details on the economic debate, including links to a podcast, and biographies of the participants, go to: http://nabe.com/publib/debate08.html