Economist: Deniers keep us from fixing programs that aren't working

>>> welcome back to " morning joe ." taking a look at the u.s. capital . former director of the cbo and former adviser to the john mccain campaign and president of american action forum, douglas holtz eken. he says the senate budget is bad choice for america . at least they got a budget. give them credit.

>> credit where credit is due.

>> if four years we can at least start the debate.

>> i think the biggest part. two now very different visions for the future and at least we know what the senate is going to put their votes behind.

>> regular order. i salute the democrats for finally doing that. let's talk about long-term death -- debt.

>> long-term death? good to be here!

>> long-term death, as caine said in the end world any way.

>> when we talk about long-term debt there is, of course, an ongoing debate certainly. i've had with pawl krugman. know you have as well that paul krugman says it doesn't matter. we have grown up hearing, believing, reading that whenever countries get to 90%, when their debt is 90% of gdp, it has an impact and when i was on charlie rose show debating paul krugman , charlie rose said it is bad for us when it gets over 90%, right? he said, oh, no, that's not a problem at all. who is right?

>> you're right. this is not a matter who intellect is bigger or more powerful. you have to look at the historical record and countries that get too much debt grow more slowly than countries that look the same, otherwise, have the same approach and have less debt.

>> what studies back that up?

>> the famous book called "this time it's different." and the truth is we are not that new or different, that things the united states has done is in the midst of doing have been done before and they don't work out well.

>> douglas , why can't we have simultaneously a robust debate on tax reform ? that is sitting out there and no one is moving on it and everyone is very unhappy with the tax code as it currently exists and there are some opportunities there to pick up some additional revenue. but, at the same time, it would send a signal, i think, across the entire spectrum of the country maybe they can get something done.

>> i agree with you. you're an experienced observer of these things. why can't we have this? the simpson-bowles system is hire tax reform and we are trapped.

>> i don't know why the president just doesn't reach out and say we are having trouble with these other issues. this is one in which we can all gather at the same place and get something done.

>> isn't the argument what to do about the -- that's where everyone sort of breaks. the president is saying, it's not -- some of it should be used to -- some of it should go back into the government and some of it could be used to lower tax rates .

>> the president is not spending the good tax reform and debate is why. washington loves to talk about taxes. a long time now sideways spending is the problem and until we talk about spending it doesn't matter what revenue you get. got to fix the spending problem.

>> nancy pelosi says we don't have a spending problem. actually, you've got -- hoyer saying we do. paul krugman you don't have to worry about medicare until 2025 . this has bubbled up on the left the past three or four months. we call it debt deniers here. what is going on here?

>> i've been saying the same thing for ten years. since i was at the cbo. the facts haven't changed. if you look at the numbers, you know, spending at rates you cannot tax your way out of and can't grow your way out of the only thing you can do is get your arms around those programs. what it's come down to is the recognition that we have to do something different in medicare. we have to do something digit in medicaid. fix the social security on its own merits and this is really a fight about how to save the social safety net . the sad part for me is there should be a fight about how to save it but there shouldn't be a fight whether to save it or not and what it's turned into. the deniers are stopping us from fixing programs that are good for americans.

>> we see both sides are afraid to say what they would do. i guess bought of the political implications. having said that, we don't seem to be able to do anything preventive in this country. are we going to have to wait for a catastrophe in order to rectify this problem and what will that catastrophe fee?

>> i think we have two catastrophic stories. one is broken politics a long time and the kind of performance in the recent years with the economy. everybody is frustrated. that is the good news scenario. the bad news scenario we literally fix it and we relive 2008 .

>> can i ask a question as conservatives especially focus on the issue of deficit and what we are going to do about it and it becomes a rallying cry. where was that rhetoric when we were involved in two wars and paying for them on a credit card and having two major tax cuts put in place? iraq war is one of the first wars we haven't had a war tax . where was that fiscal responsibility a decade ago?

>> missing. and i'm the wrong person to ask this. because i said famously in budget circles. it's a big crowd. in three the party is over, people get it and not spend any more money and ten years later, i was dead wrong. we lost our rudder somewhere. that's something that america actually stuck to and lived by and served america well 200 years. since then we have developed big problems.

>> i also illusion the war would pay for itself and be resolved within six months and up and running when everybody had been in baghdad and i had been there a lot of occasions knew how broken the country was.

>> here is the key. we have seen debates before. any time someone uses that phrase pay for itself, write that down. not true!

>> but give me your assessment of about what is going on with the dysfunction in washington on the fiscal and monetary matters and at the same time the american economy is lifting off. we seem to be on parallel tracks. the economy itself is it built on a solid foundation do you think or are people just investing because they don't have any other place to put their money at the moment?

>> the u.s. is still the largest, strongest economy on the globe and lots of reasons to be optimistic and i fundamentally am. the economy is digging its way out of a very bad economy. the housing market we hope is recovering and better way to get better growth. the bad news is the fed is held hostage by a congress and administration that can't get anything done and it will continue to print money because it feels like it has to do something but it's not working very well. so really all roads lead to let's fix the debt and until we balance budgets, until we get serious about that, the fed is not able to fix it.

>> douglas holtz-eakin, thank you very much. tom brokaw , thank you. alex, we will see you at noon.

>> what is coming on at noon?

>> doug is back!

>> you just can't shake him!

>> smart, smart, smart. thank you so much.

>>> on tomorrow's show, we have the secretary of health and human services kathleen sebelius with join us.

>>> coming up here on " morning joe ," how do can you tell if a novel is worth reading when it gets a movie deal before it even hits the shelves. we will talk to best seller harlan coppen about his best novel in six years. do