Fiscal Hawks Near Extinction
by
Douglas Holtz-Eakin (YouTube screenshot)

I recall reading an account of the Passenger Pigeon Project, and a related effort called Revive & Restore, the latter being an effort to genetically reproduce and bring back the now extinct Passenger Pigeon, Ectopistes migratorius, long gone for over a hundred years. Once there were millions, maybe billions of these birds darkening the skies of America. A migrating flock could take two hours to pass over a given spot and could occupy an entire forest when roosting. They were also good to eat.

Alas, by September 1, 1914, the last survivor, a female named Martha, died in the Cincinnati Zoo. She was 29 years old, palsied and trembling, and had never laid a single fertile egg.

These melancholy recollections came to mind reading the recent lamentations of Douglas Holtz-Eakin, a self-confessed fiscal hawk, Princeton-trained, former chief economist for the President’s Council of Economic Advisers (1989–90) and, subsequently, director of the non-partisan Congressional Budget Office (CBO) (2003–05).

To fix Holtz-Eakin on the political spectrum, note that he served as Director of Domestic and Economic Policy for the late Sen. John McCain’s presidential campaign in 2007–08.

Holtz-Eakin founded the American Action Forum (AAF) in 2009 and writes a very tight, informed, and economically literate daily column or blog post in AAF’s morning newsletter, the “Daily Dish.” AAF is a great resource on public policy issues relating to economics, regulation, benefit-cost analysis, and fiscal matters.

Generally, Holtz-Eakin adheres to rigorous economic doctrine on tariffs, spending, benefit-cost analysis of regulation, and the like. He supports the Export-Import Bank, however, but usually comes down on the right side of most issues, explaining in clear, succinct English his reasoning on the issues of the day. These are hard times for him.

“I’m a fiscal hawk from way back, and all my heebie-jeebies are going off when I see these numbers [federal spending to relieve COVID-19 impacts]. But then I look at the scale of the problem, and I think, yeah, that’s that. Gotta do it,” writes Holtz-Eakin (“Eakinomics: The Mathematics of Gotta Do It,” May 1, 2020).

This fiscal hawk confesses, “Yes, I said that. And I’ve gotten a fair amount of grief for it.” But he justifies his deviation from the true faith by reflecting on the numbers and the economic data, which are horrific due to this plague. I recently described on this site the latest, very depressing report by CBO on the current state of the U.S. economy (“Indentured Grandchildren Revisited, The American Spectator, April 27, 2020).

According to Holtz-Eakin, employment fell at an annual rate of 5.4 percent in March, the first half of which was basically unscathed by the pandemic. The April decline was 19.7 at an annual rate, dwarfing the 3.7 percent decline in 2008 or 8.2 percent in 1932. These were “the worst years of the Great Recession and Great Depression, respectively.”

The economist sees gross domestic product (GDP) cratering at a rate of 30-40 percent compared to the worst quarter of the Great Recession, the fourth quarter, at 8.4 percent. “For the whole year, the decline in 2009 was 2.5 percent and in 1932 was 12.9 percent.”

“This year will dwarf the Great Recession,” claims the former CBO director. “Only with solid growth in the second half of the year will it sneak past the worst of the Great Depression.”

His heebie-jeebies are going hyperactive as he contemplates the federal budget deficit now “roughly triple to $3 trillion in the space of the past two months. And they get worse when I realize that it will likely have quadrupled before all is said and done in 2020.”

“The biggest increase in the Great Recession was a rough doubling from 2008 to 2009,” says Holtz-Eakin. “But the problem is anywhere from twice to five times as large as in the Great Recession, and the federal deficit may have to rise comparably to fight the downdraft.”

You have to be Dick Cheney (“deficits don’t matter”) or a doctrinaire Modern Monetary Theorist not to be frightened by these numbers. But Douglas Holtz-Eakin basically is saying there is really no alternative.

“I remain a budget hawk. I am unconvinced that deficits pay for themselves, that federal debt is costless, or any of the other nonsense that has become so trendy,” pleads this endangered bird. “But I do know that the economy comes first. If you can mitigate damage to the economy — even if it means a less pristine budget — you do it.”

Holtz-Eakin does not offer his view of the wisdom, efficacy, or extent of the current shutdown mandated by the federal and state governments, the proximate cause of the economic wreckage. What is done is done, although one can pray that it will soon be undone or substantially scaled back. So he is grimly embracing Peter Drucker’s maxim: “first things first, second things not at all.”

So what does an endangered, nearly extinct species of hawk — budget, deficit, or fiscal — envision as a future agenda post-virus? We anxiously await further columns from this economist, but one can speculate. He would, no doubt, call for budget restraint, entitlement reform, possibly, revenue “enhancements” or taxes, hopefully, on consumption rather than income and production. How about a value-added tax? Robust economic growth is key. So do we pursue deregulation, repeal of the minimum wage, Davis-Bacon, and the capital gains tax?

Sadly, almost every one of the measures outlined above, now has zero bipartisan political support in Washington. What one political party supports, the other opposes. About the only thing that is supported on both sides of the aisle is more spending, which will be the dominant working coalition for the foreseeable future.

So will we be able to rescue the lonely fiscal hawk imprisoned in amber and genetically replicate its kind in the next generation? We will have to wait and see if they have any success with the Passenger Pigeon first.

Such is the plight of the fiscal hawk.

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