Click, pause. Click, pause. Click, pause. On a busy morning at the Council on Foreign Relations (CFR), a nonpartisan think tank in Washington, DC, the faint echo of a mouse button being pressed repeatedly, almost frantically, rises above all other sounds coming from the bright, austere office of economist Douglas Holtz-Eakin.

Wearing an elegant black suit, crisp white shirt, and electric yellow tie, Holtz-Eakin is dressed like the consummate professional he is. His rank matches his outfit: He’s the center’s Paul A. Volcker Chair in International Economics and Director of the Maurice R. Greenberg Center for Geoeconomic Studies. Yet even that novella of a job title is far from containing the man in full.

At this moment, for instance, at 9:59 on a Wednesday morning in mid-October, Holtz-Eakin seems slightly over-caffeinated, sitting with his face just inches from his computer screen, anxiously clicking the “refresh” button on his Internet browser over and over again.

But he’s engaged in a serious business, one in which speed counts. Furthermore, today is an important day. Sometime within the next minute, at the stroke of 10 a.m., the U.S. Department of the Treasury is expected to post on its website the federal budget deficit for fiscal year 2006. Holtz-Eakin guesses it’ll be something just under $250 billion.

An hour after that, President Bush will follow up with a formal announcement in a press conference in the White House Rose Garden. Then the calls will start coming in. Almost immediately, the financial news media from all over the country will turn to Holtz-Eakin to evaluate the number, expecting him to have something intelligent to say.

The seconds are ticking away quickly, getting ever closer to 10 a.m. He’s refreshing his browser like mad. Now it’s definitely 10 a.m., no matter whose clock you go by. Still, no change on the treasury department website.

The suspense is getting thick. It would be easy, amidst all the excitement, not to notice the beautiful view. The CFR occupies the seventh floor of the Carnegie Center for International Peace. Holtz-Eakin’s office has a wall of windows affording him a splendid panorama of the rooftops around Dupont Circle and beyond. That’s why he didn’t bother to decorate, he says.

Suddenly, Holtz-Eakin turns up the volume on the television set across the room. Earlier that morning, he had looked over at the screen, noticed something strange, and then verbally lambasted CNBC for misspelling “discussions” (they left out the first ‘s’). Now he’s duly impressed. Somehow, someone at the cable news channel got word of the deficit before he did. Turns out it’s $247.7 billion, somewhat lower than the $250 billion he’d imagined and far lower than the numbers the Bush administration had been predicting.

“Where’d they get it?” he yells at the TV. But he can’t spend much time wondering. There’s too much to do now. He whips out a pocket calculator, crunches a few figures in rapid succession, then opens a document on his computer and enters the results into a chart. “It’s important to actually write something,” he says while typing. The act of writing helps him sort out the implications.

A minute or two later, he rolls his chair away from his desk, looks down at the floor, and makes his pronouncement: There must have been a huge windfall from income taxes. “It’s a good number,” he concludes, “but I just don’t see how this can continue.” That’s his expert opinion, and he’ll spend the rest of the day expressing it in one form or another, always coming up with different and creative ways of saying the same thing.

Though generally a fan of President Bush, he wasn’t afraid to criticize Republican policies. Nor was he himself immune to criticism. “Idiot” and “devil” were two of many titles regularly applied to him by legislators who seemingly didn’t appreciate Holtz-Eakin’s uninhibited honesty.


When Holtz-Eakin walked to work around 6:30 a.m. this morning (like many in Washington, he doesn’t own a car), he planned his day assuming the announcement would arrive mid-afternoon, not mid-morning. Now he has to rearrange his schedule, or rather, get his research assistant, Chad Waryas, a recent graduate of Trinity University, to do it for him. “Chad runs my life,” Holtz-Eakin says. “I start fires and he puts them out.”

Waryas functions in part like a secretary, screening Holtz-Eakin’s phone calls and arranging his appointments. But he also gets to use his own expertise as an economics major, editing and researching Holtz-Eakin’s vast output, a continuous stream of documents including speeches, testimony, articles, and research papers. “It’s hard to keep up with his energy,” Waryas says. “But when you see your boss on TV, that’s pretty exciting.”

“He’s not allowed to have fun,” his boss cheerfully chimes in.

First to go on today’s schedule is a lunch appointment with a friend from the International Monetary Fund, who’s trying to enlist Holtz-Eakin’s help in Senator John McCain’s reelection campaign. No time for that now. He also had a pre-existing appointment to speak about the deficit on Bloomberg Television, the cable business channel. That gets bumped up a few hours.

He’s already done one or two telephone interviews in advance of the announcement, with reporters asking him to predict what the deficit will be. “Two hundred fifty billion, two hundred sixty billion–I view those as the same number,” he tells them. “But the source of the good news, arithmetically, it can’t continue.” His point is that ballooning Social Security, healthcare, and other “entitlement programs” for Baby Boomers essentially dwarf all other factors in the economy. “There’s a big bill that’s known and it’s just out there waiting in the future,” he says.

Indeed, when Holtz-Eakin isn’t talking about the deficit, he’s probably talking, or at least thinking, about healthcare. It’s almost his second job. In May 2006, he was appointed a member of the Medicare Payment Advisory Commission, an independent federal body established in 1997 to advise Congress on payments to Medicare. Medicare and Medicaid are the largest crises facing the American economy, Holtz-Eakin says. Currently these programs eat up roughly four cents of every national dollar. By 2050, after the Baby Boomers have retired, Holtz-Eakin projects that figure will rise to 20 cents, when even 12 cents would be calamitous. “That simply cannot happen,” he says, and the longer reform is postponed, the harder the fix becomes.

And the problem isn’t merely that more and more people are requiring healthcare. The real rub, he says, has to do with spending. We treat far more illnesses today than ever before, using more expensive drugs than ever before (think Viagra). Whenever a new technology comes on the market, we adopt it almost without thinking, no matter how much it costs. That’s the problem. Healthcare isn’t anywhere near to being efficient, he says. “Almost no one [around the world] likes their health care system. We happen to love ours. We just can’t pay for it.” This comment, like many others, evokes from Holtz-Eakin a deep, infectious guffaw, followed by a glance around the room, as if to ask everyone in earshot “Am I right, or what?” He’s probably the life of any cocktail party.


Now the phone is ringing every few minutes, and each time, it’s a reporter from a major media outlet: USA Today, the Wall Street Journal, the New York Times, the Los Angeles Times, Nightly Business Report, MSNBC, CNBC. He’s surprised when he doesn’t get a call from the Financial Times.

The message is the same every time: a lower-thanexpected deficit is definitely good news, but we still have some serious problems looming over us, and the deficit will probably increase next year. In between calls, Holtz- Eakin steps out into the institute’s maze of hallways and cubicles to refill his coffee and grab a breakfast snack. “There’s always something going on in the conference room,” he says, “and the leftovers are fantastic,” striding quickly back into his office. Later in the day, he’ll refuel with Twizzlers and Coca-Cola.

It’s not hard to see why reporters like Holtz-Eakin. He’s an amazing resource. Bob McMahon, the council’s web editor, calls Holtz-Eakin “one of our founts of wisdom. It’s wonderful to tap into his expertise. He’s always got an open door and a joke to share.” For one thing, Holtz-Eakin possesses rare insight. The former director of the Congressional Budget Office (CBO) and the former chief economist in the second Bush administration’s Council of Economic Advisers, Holtz-Eakin is one of the few experts who can comment on current federal economic news from a truly authoritative, insider’s perspective.

He’s also just about as unbiased as anyone in Washington can be, with friends and enemies on both sides of the political aisle. During his three years at the CBO, he established a reputation for being a straightshooter, one who transcends his own Republican allegiance to tell things like they are, no matter who the news may upset. He was perhaps best known, and most despised, for being an advocate of “dynamic scoring”– incorporating the impact on economic growth into the tabulated costs of proposed legislation. “The budget office is a culture that rewards people for not tilting,” he says, referring to its nonpartisan nature. As a joke, he sometimes tells people his political instincts consist of nothing more than “throwing a grenade and ducking.”

But there’s more to it than that. Holtz-Eakin is probably most valuable to reporters because he has a gift for extracting the most salient points from a vat of complex economic data and phrasing them in language anyone can understand. Unlike many economists, he can take that federal budget deficit number and make the proverbial man-on-the-street understand why it matters. He can even make it interesting.

Holtz-Eakin possesses rare insight. The former director of the Congressional Budget Office and the former chief economist in the White House Council of Economic Advisers, he is one of the few experts who can comment on current federal economic news from a truly authoritative, insider’s perspective.


The day before the deficit announcement, Holtz-Eakin took part in a panel discussion at the National Press Club. The topic was the role annuities might play for Baby Boomers in conjunction with Social Security. It was a fairly dull affair, for the most part, and Holtz-Eakin had confessed earlier to having little interest in the subject. The last to speak, he listened patiently, fidgeting in his chair, shuffling papers, and taking notes while two fellow economists dryly quoted reams of figures supporting their case for greater reliance on annuities. Then he took the podium and lobbed his grenade: the problem with Social Security is beyond annuities to fix. “We have to have greater imagination,” he said. “The stakes are, in fact, quite high.” As he continued with what he called “soft criticism,” he was the only speaker to evoke both applause and laughter.

Probably that’s because he comes off like a regular guy. Holtz-Eakin grew up in Pittsburgh and rural Illinois. To this day, he still holds a fondness for his hometown and other Midwest Rust-Belt cities struggling to find their place in the 21st-century economy.

He admits his decision to attend Denison wasn’t particularly well informed. Lots of other kids from his area were attending at the time, and he found the campus attractive. That, and he wanted to run competitively, but knew he wasn’t fast enough for the track team at a larger school. But running wasn’t really his calling, anyway. A freshman-year injury laid him low for a while, and by his sophomore year, he had given up competitive running.

A double-major in math and economics, Holtz-Eakin was far more immersed in the emerging field of computer programming. But he still hadn’t settled on any clear path. Then one of his professors recommended him for the Oak Ridge Science Semester, a special program affiliated with the Oak Ridge National Laboratory in Tennessee. “It was just to get me out of town,” he quips. It ended up being a pivotal experience. His project there involved economic modeling. Finally, something had really captured his interest. “It explains the nature of social decision-making,” he says, when asked why he became an economist. “It’s really about how we allocate resources and who gets what. In the end, it’s very practical.”


Practicality, as it turns out, has guided most of his major decisions to date. Princeton University, where both his father and brother had attended, offered Holtz-Eakin a free ride to graduate school, and he took it. There was an adjustment period, beginning with flunked math exams. “It was a cultural difference,” he explains. “I wasn’t ready.” But he studied hard and blossomed in the program, earning his Ph.D. with a dissertation that outlined ways for municipal governments to weather business cycles.

His first job was teaching at Columbia University, where he found the atmosphere disheartening. Students were too independent and most of the professors were deeply absorbed in private research. “I had a crisis of confidence,” he says. “I had the sense that it was all sort of pointless. It was a lonely enterprise.”

Right about this time, a friend from Princeton, economist Harvey Rosen, went to work in the first Bush administration. Holtz-Eakin joined him there in 1989, advising the president for the next 16 months. He was hooked. Applying economics to real-world situations in real time was his passion. “The problem, I realized, wasn’t what I was doing but how I was doing it.”

At the time, Holtz-Eakin was married to Heidi Holtz ‘80 and they had two young children, Eleanor and Colin. Seeking an environment more family-friendly than Washington, he accepted a position with Syracuse University, ultimately chairing its economics department.

Only a few days into the job, he went to the hospital with flu symptoms. The diagnosis was actually far more serious: a block in his renal artery had caused his right kidney to shrink, resulting in a pronounced spike in blood pressure. His Syracuse colleagues thought they’d given him a heart attack already. Rather, a serious car accident during his senior year at Denison had left him with a renal artery disorder. It took angioplasty and eventually a unique transplant (he was both the donor and recipient) of his kidney to fix the problem.

Twelve years into his Syracuse tenure, in 2001, Holtz-Eakin got a call from Glenn Hubbard, chairman of President George W. Bush’s Council of Economic Advisers, inviting him back to Washington to serve as chief economist. By that point, he says, “I was ready.”

Once again, though, he started off with an emergency. Shortly after joining the council, Holtz-Eakin hurt his ankle and had to use crutches. Then came September 11. Holtz-Eakin remembers fleeing his office with his colleagues after learning the Pentagon had been hit. “All hell broke loose,” he recalls. “I couldn’t run, but I crutched as fast as I could.” A few days later, the council produced an eight-page memo reassuring the president the economy would survive the disruption.

Back in the fold of Washington, Holtz-Eakin held to his principles, delivering economic news without partisan spin. Though generally a fan of President Bush, particularly his top-down style of leadership, he wasn’t afraid to criticize Republican policies. Nor was he himself immune to criticism. “Idiot” and “devil” were two favorites of many titles regularly applied to him by various senators and congressmen who seemingly didn’t appreciate Holtz-Eakin’s uninhibited honesty.

Not everyone was unhappy. President Bush pulled Holtz-Eakin aside during a White House Christmas party and thanked him for his candor. That brief encounter was the prelude to the biggest break in Holtz- Eakin’s career–his appointment at the Congressional Budget Office in 2003. He became the first person in history to land there straight from the White House.

“There is no doubt he is a straight shooter,” Robert Reischauer, director of the CBO from 1989 to 1994, told the New York Times. “What you look for is someone who sees himself as wanting to be judged by the quality of his work rather than the number of his well-connected friends. I was very glad he was chosen for the job.”


Time at the budget office passed quickly. Life revolved around the Congress, which often entailed long days and even longer nights. Big battles, he says, took place over relatively minor expenditures, pet projects for which individual representatives had strong feelings. Of course, there were not-so-minor expenditures, too, such as the administration’s proposed prescription drug benefit. “I lived that for three years,” Holtz-Eakin says. “It was an heroically impossible task, evaluating an insurance product that didn’t exist in nature.” Throughout that period, he insisted on delivering his opinions in private. “I always felt that on the tough calls, I should deliver the news myself. It’s only fair.”

The one time he didn’t follow that rule, he got in trouble with his mother. The CBO had issued a tax report that generated partisan wrangling, and he had been taken to task by Chicago Sun-Times columnist Robert Novak. The next thing Holtz-Eakin knew, he was on the phone with his mother, calming her down after she’d had to defend her son from her friends.

Like everyone in a high-profile government position, Holtz-Eakin attracted his share of eccentrics. For years, he recalls, a woman in North Carolina forwarded her monthly electric bill to him. Prison inmates sent him passionate but futile pleas for DNA tests. Another complete stranger once sent him a rambling, nonsensical document of nearly a thousand pages.

By contrast, his proudest achievement at the budget office, a response to Hurricane Katrina, was only a few pages long. In the days leading up to the disaster, Holtz- Eakin called an emergency meeting and demanded that his office produce a timely, level-headed prediction of the storm’s likely effects on the economy. “That was the CBO at our best,” he says.

By law, Holtz-Eakin’s term at the CBO was slated to last four years, until 2007. Then, in late 2005, while waiting on a flight at LaGuardia airport in New York, he ran into Richard Haass, president of the Council on Foreign Relations. The chance meeting led to Haass offering him a job as head of the CFR’s new Greenberg Center, devoted to exploring the intersection between economic policy and national security.

It was an offer he couldn’t refuse, not only for the prestige but also for the higher salary to support two children, both of whom are now in college. His daughter is a freshman at American University and his son is a senior at Swarthmore. As it happens, Holtz-Eakin has produced at least one Democrat, and an active one at that. Colin served as the internet director for Democratic Congressman-elect Joe Sestak of Pennsylvania.


Back in his office, in between interviews about the deficit, Holtz- Eakin has plenty to say on other burning economic issues. He still dislikes current tax policy, saying the system encourages corporations to move overseas, when businesses should be given every reason to move here from other countries. War with Iran? It would be economically feasible, a miniscule allotment compared to just a year of Social Security spending, but it would still force cuts in other areas of the federal budget. If he were in charge, he’d eliminate the Department of Energy. (“What have they ever done?” he asks.) “But waste and inefficiency are not political terms. You have to make them political, explain who’s affected by it, why it’s worth it…. Otherwise, we’ll displace all the advantages we’ve built up since the Cold War.”

In the end, though, Holtz-Eakin is an optimist. He believes the necessary steps will be taken, eventually– once there’s no other choice.

It’s now 1:30 in the afternoon. Seven hours into his day, Holtz-Eakin hasn’t had any lunch, and he’s starting to look a little ragged. But he’s still got a speech to write and at least two television interviews to tape before he can go home and flip on some Tricia Yearwood. His daughter is in town, too, and he’s excited to see her.

Resting his brain for a moment, Holtz-Eakin pauses to watch some television, turning up the volume when he comes across a channel replaying footage from the president’s press conference earlier that morning. Analyzing the president as if he were an economic report, Holtz-Eakin can’t help but see the bigger picture. The man looks old, he says. But he can sympathize. His own beard had no white in it before he returned to Washington either. Now it’s a distinguished silver.

Continuing this reverie, Holtz-Eakin thinks back fondly to the college summer he spent hammering railroad spikes and imagines whether he should have made that his career. There’d be less stress, that’s for sure. But it wouldn’t have made him one of the nation’s leading economists. The phone rings again. It’s the crew from Nightly Business Report. They’re ready for him in the TV room.

Cleveland-based Zachary Lewis wrote about Joy Rose ‘78 and her band, Housewives on Prozac, for the Fall 2005 “Entertainment” issue of this magazine.

Editor’s note: Holtz-Eakin did finally have that meeting regarding Senator John McCain’s presidential bid. In January, he left the Council on Foreign Relations and signed on as economic policy consultant for the senator’s presidential exploratory committee.

Doug Holtz-Eakin 101

Calling on more than two decades of leading scholarly research and applied theory, the economist takes us to school.

What is the elixir for economic growth?

What are the sources of increases in income per capita? Economists have highlighted the role of capital accumulation–simply having more “stuff” for workers to use–and technological innovation. Comparing the growth performance of U.S. states is a good laboratory for understanding what contributes to growth. The research suggests that an environment supportive of capital investment is very beneficial and helps poorer states catch up. But sustained, long-run increases in the standard of living are built on technological and entrepreneurial innovations.

Economic mobility: is there an American Dream?

It is widely recognized that simple comparisons of the rich and the poor are misleading because people are not frozen into their income class–”poor” graduate students quickly grow into “rich” professionals. Research focusing on economic mobility provides a better insight into issues of economic fairness. One interesting comparison between the U.S. (i.e., dynamic) and Germany (i.e., rigid Old Europe) suggests that relative mobility is more similar than different–people move up and down compared to others at remarkably similar rates. However, absolute mobility is much larger in the U.S., it just takes a bigger jump to get to the top or larger fall to end up at the bottom. However, the American dream remains true – going into business for oneself is associated with greater mobility.

Entrepreneurs: what is the fuss about?

Entrepreneurs occupy a special place in the lore of American economic success. Despite this, remarkably little is known about them–where they come from, what drives them, and the factors that lead to success and failure. In part, this reflects the fact that conventional research data contains lots of labels and classifications, but nothing for “entrepreneur.” However, by using a wide variety of classification schemes, it is possible to put some statistical meat on the economics of entrepreneurs. They come from the “try, try, try again” school of thought–typically starting more than one business (and often failing before they succeed). Entrepreneurs run in families–their children are more likely to be entrepreneurial. They appear less daunted by risk. For example, the prospect of losing health insurance slows the typical worker from changing jobs but rarely deters entrepreneurs from going into business alone.

However, financial constraints do matter. Entrepreneurs are affected by access to capital. A windfall inheritance, for example, greatly enhances the chances of starting and growing a business. Taxes matter. Entrepreneurs are disproportionately subject to federal and state estate taxes. Cutting individual tax rates on entrepreneurs raises the probability that they expand their capital and payrolls, and increases their businesses’ pace of growth, not to mention chance of survival.

How federal policy affects states and localities:

Despite “balanced budget” requirements, state and local governments use budgetary legerdemain to shift spending among various accounts in order to partially offset business cycle downturns in tax receipts–an economically beneficial move because taxpayers want smooth, uninterrupted service. However, they do not use the same techniques to save during the good times. Federal policy also shifts the environment. The deductibility of property and income taxes makes those taxes “cheaper.” The result is to shift the mix of financing away from debt and toward taxes, shift the mix of taxes toward deductible taxes (and away from non-deductible sales taxes), and raise the overall level of spending.

Published November 2010