STEVE INSKEEP, HOST:
President Biden submitted a budget to Congress. Republicans have already said whatever budget they pass, it's not going to be that. So how will a divided government set priorities for a decade to come? We have an outside view from Douglas Holtz-Eakin, who served in the administration of President George W. Bush and also led the nonpartisan Congressional Budget Office once upon a time. Mr. Holtz-Eakin, welcome back.
DOUGLAS HOLTZ-EAKIN: Well, thank you.
INSKEEP: OK. Big picture here - pandemic spending has been winding down. And the Biden administration says, we're ready now to restrain spending and cut borrowing and cut the deficit over time. Does his budget really do that?
HOLTZ-EAKIN: No. The spending proposed for next year would exceed the largest amount during the pandemic. So what used to be an emergency is now business as usual. The president is advertising $3 trillion in deficit reduction, but that comes from raising taxes by about $5 trillion over the next 10 years. That's a nonstarter in Congress. He couldn't get the same taxes through when Democrats controlled both houses. So this is not a budget that's going to solve our debt and deficit problem. Indeed, even taken at face value, we have $24 trillion in debt outstanding. This would add another 19 over the next 10 years. So it's not really a stringent fiscal budget.
INSKEEP: Why wouldn't Republicans at least think about a tax increase from time to time? If taxes are going to go down, they sometimes must have to go up.
HOLTZ-EAKIN: Republicans for a long time now have not cared about increasing taxes. And they certainly haven't shown any interest in controlling deficits. So there's a lot of talk that's different in 2023. But we'll see if any Congress actually gets serious about taking on our fiscal problems.
INSKEEP: Mr. Holtz-Eakin, I hope the sirens are not coming for you as we talk on this Friday morning.
HOLTZ-EAKIN: I am half a block from the White House. And there's always the noise. My apologies.
INSKEEP: Oh, OK. OK. No, it's quite all right. It's quite all right. It's part of the scenery here.
HOLTZ-EAKIN: (Laughter).
INSKEEP: You mentioned that Republicans don't care about raising taxes. I get that. I'd like to know if Republicans really care at all about the deficit. I know they say they do. But when they were in power a few years ago, they did a monumental tax cut that was not financed. Isn't it true that Republicans literally don't care at all about the deficit except when they can use it against a Democratic president?
HOLTZ-EAKIN: There's no evidence that either side has cared about deficits in the 21st century. I mean, it's really been quite striking. We've seen the debt rise, even measured relative to the size of the growing economy, essentially nonstop for the entire 21st century for two decades. So that can't continue. And the question is, when is it going to turn the corner? And which party is going to take the lead?
INSKEEP: Are you convinced that the sirens are coming - hopefully it's not the debt police.
HOLTZ-EAKIN: (Laughter).
INSKEEP: But are you convinced there is a point? I mean, there have been some economists in recent years who've basically said, maybe the debt doesn't matter; maybe it can go up infinitely or a lot farther than it has.
HOLTZ-EAKIN: I'm not in that camp. The debt matters in the following very simple way. The debt is used to get money from the private sector and use it in the government. And when it does that, if you take a private sector investment and plow it into a government investment, you lose about half the rate of return. Most of the time when the government takes money, it doesn't invest. It simply supports additional spending and lifestyle. That's the point of Social Security. That's the point of Medicare. And so our propensity to borrow and spend in this way is a headwind to investing in the economy and generating greater prosperity in the future. We pay a little bit every day.
INSKEEP: You're reminding us if you borrow money to invest in something, that can be good. If you borrow money to pay your day-to-day bills, it may not be so good. I want to ask one more question, though. House Republicans have said they're not going to pay existing U.S. bills, raise the debt ceiling, unless they get cuts to the budget, which they haven't been willing to specify. Is that a wise way to approach this?
HOLTZ-EAKIN: The debt limit has to go up. There's simply no way around that. Failure to raise it will lead to a default on U.S. treasuries and just an enormous amount of financial chaos in the economic downturn. So they can say that, but they will raise the debt limit. They have to.
INSKEEP: Douglas Holtz-Eakin, you got a lot of intelligence and some sirens in four minutes. Thanks so much.
HOLTZ-EAKIN: Thank you.
INSKEEP: He's an economist who served in the George W. Bush White House and is now president of the American Action Forum. Transcript provided by NPR, Copyright NPR.