Gary Cohn, Donald Trump’s top economic adviser, told CNBC’s John Harwood that the President had laid down “two really important principles” to guide the lawmakers and officials putting the legislation together.
- “Number one is we have to deliver middle-class tax cuts to the hardworking families in this country,”
- “Number two, our corporate tax system just is not competitive with the rest of the world. We have to create a corporate tax rate, and along with that a pass-through tax rate, that makes us competitive with the rest of the world so we can attract businesses back to the United States.”
.. Trump’s two principles have run into conflict with each other.
.. the Ryan bill would give taxpayers in the middle twenty per cent of the income distribution in 2018 a tax cut of eight hundred and forty dollars, or $16.15 a week, on average.
.. Compared to the $37,440 break that taxpayers in the top one per cent would receive
.. Over time, the modest tax breaks these people would initially receive would erode—and ten years from now many of them would be paying more money, not less, to the federal government.
.. the Republican tax proposals, which Trump has promoted by promising the biggest tax cuts in history, isn’t much of a tax cut at all in the sense that most Americans understand the term.
.. It’s really designed to reduce the tax burden on businesses and wealthy individuals, and it could only be justified if, defying history, it delivered the economy-wide upsurge in G.D.P. growth, capital investment, and wages that the White House has promised
Trump’s top economist offers solution to unemployment: More government jobs
In the latest edition of the ‘POLITICO Money’ podcast, Council of Economic Advisers Chair Kevin Hassett discusses tax policy, drawing Americans back into the workforce and his ‘Dow 36,000’ prediction.
President Donald Trump’s top economist has an unusual idea for dealing with the problem of long-term unemployment: Just have the government hire people.
.. Kevin Hassett, the conservative chairman of the White House Council of Economic Advisers, believes some Americans are so disconnected from the workforce that the best idea to get them working again could be a federal jobs program that would ultimately lead to private-sector employment.
.. To Hassett, long-term unemployment often leads to family breakdown and descent into addiction and other maladies. “People who have been unemployed for more than a year very often don’t ever reconnect to the labor force,” he said. “And very often they fall into sort of downward spirals of personal despair where they end up abusing substances and have a higher risk of divorce. Some of the literature in this area is just absolutely disturbing.”.. Hassett remains convinced that the tax cut bill now emerging on Capitol Hill that would slice the top corporate rate from 35 percent to 20 percent will in fact add at least $4,000 in increased wages per household over the next several years.. Hassett called the idea “iron-clad” based on studies of other countries cutting their corporate rate. And he said he believes the increase could be even greater... He argues that a lower corporate rate and more immediate expensing of capital investments will lead to greater productivity among workers and thus higher wages without big inflationary pressure... “If you have a supply-side stimulus precisely now, we can get capital deepening back to where it used to be, then you could add a percent to GDP growth,” he said. “And that will increase labor productivity and increase wages but not in a way that’s inflationary.”.. Hassett, an affable economist with friends on both side of the partisan aisle, also spoke about his often-lampooned 1999 book with James Glassman, “Dow 36,000,” that predicted stocks would hit that mark by 2004. Instead, the dot-com bubble burst and stocks tanked.Hassett described the title of the book as a bit of a “youthful indiscretion” that was also somewhat unfairly maligned. “The point was that people who buy and hold stocks for the long run tend to do well, but that stocks go up and down a lot and it’s scary.”
This tax reform thing won’t be as easy as Republicans think
Despite all that trickle-down propaganda, about three-quarters of Americans — and more than half of Republicans — believe that wealthy households and big corporations pay too little in taxes
.. That said, Republicans’ main problem isn’t what the little people think. It’s what the lobbyists want and, more significantly, what complicated budget rules allow.
.. Fitting a $2.4 trillion peg into a $1.5 trillion hole will be tricky. Proposals to cut the corporate income tax rate to 20 percent and repeal the corporate alternative minimum tax alone cost $2 trillion, according to the Tax Policy Center. Republicans will have to find more offsets, or make the cuts less generous, or both.
.. As a result, Republican lawmakers are even more likely than usual to deploy budgetary gimmicks, such as ludicrous-speed economic growth or pretending that a corporate tax break will expire in five years when everyone knows it will be renewed... “statutory PAYGO,” that hasn’t gotten much attention.This legislation has been on and off the books (it’s been on since 2010) since 1990. It says that if all of the bills passed by the end of the current calendar year have the net effect of increasing deficits, then automatic, immediate, offsetting cuts to certain non-discretionary spending programs — including (yikes) Medicare — go into effect... If Congress successfully passes a $1.5 trillion tax cut before going home for Christmas, $28 billion would get automatically slashed from Medicare between January and September of next year. And that’s just in Medicare. Other popular programs, such as mandatory spending on student loan administration and farm subsidies, would be wiped out entirely
.. But here’s the key: A bill to override these cuts would require 60 votes.
.. Republicans seem to believe they can get the votes by threatening to cast Democrats as killing Medicare. But what’s to stop smart Democrats from pointing out that Republicans put Medicare at risk in the first place?
Trump’s top economist makes his pitch for corporate tax cuts
Ryssdal: Without getting into a “he said, he said” argument over the economics of this, because you would win, there are studies that show the opposite of what you say. And let me just give you the anecdotal question here: I’ve talked to some CEOs in the last 10 days and they say ‘Yeah no, I mean, we’re not going to give people a $4,000 raise, what is that?”
Hassett: First, I disagree that there are people that show the opposite of what I say, in the sense that that — you know, as a practical matter that means that you would take my answer and multiply it by negative one, right?
Ryssdal: Well—
Hassett: What’s really happening is that there’s a continuum of results between “workers bear none of the corporate tax” to workers bear, actually there’s some papers that say more than 100 percent.
Ryssdal: Right. Right. But let’s—
Hassett: I’m kind of in the middle there, but there are some people that are below me.
Ryssdal: Without getting into a “he said, he said” argument over the economics of this, because you would win, there are studies that show the opposite of what you say. And let me just give you the anecdotal question here: I’ve talked to some CEOs in the last 10 days and they say ‘Yeah no, I mean, we’re not going to give people a $4,000 raise, what is that?”
Hassett: First, I disagree that there are people that show the opposite of what I say, in the sense that that — you know, as a practical matter that means that you would take my answer and multiply it by negative one, right?
Ryssdal: Well—
Hassett: What’s really happening is that there’s a continuum of results between “workers bear none of the corporate tax” to workers bear, actually there’s some papers that say more than 100 percent.
Ryssdal: Right. Right. But let’s—
Hassett: I’m kind of in the middle there, but there are some people that are below me.
Ryssdal: Let’s take the question in the spirit with which it’s intended, right? I mean there are people who disagree with you, but anecdotally I’m telling you…
Hassett: No, but I’m just characterizing — Can I respond please?
Ryssdal: Of course.
Hassett: I’m characterizing the disagreement, though, as being different from the opposite of what I say. So the people who believe the low end of the literature say that folks will get about $1,000, a $900 pay hike because of this bill. I think that a conservative estimate is $4,000. There are other papers of literature that say it’s a lot more than that. But the range is all positive, and $1,000 is a heck of a lot of money to ordinary people. So even if you take the low end, then I think that you should vote for this bill.
Let’s take the question in the spirit with which it’s intended, right? I mean there are people who disagree with you, but anecdotally I’m telling you…
Hassett: No, but I’m just characterizing — Can I respond please?
Ryssdal: Of course.
Hassett: I’m characterizing the disagreement, though, as being different from the opposite of what I say. So the people who believe the low end of the literature say that folks will get about $1,000, a $900 pay hike because of this bill. I think that a conservative estimate is $4,000. There are other papers of literature that say it’s a lot more than that. But the range is all positive, and $1,000 is a heck of a lot of money to ordinary people. So even if you take the low end, then I think that you should vote for this bill.
Ryssdal: Even though there are corporate CEOs out there who are telling me “Yeah, no, we’re gonna — we have other things we need to do with that money.”
Hassett: Well, what’s going to happen to the CEO who thinks that nothing is going to happen is that a plant is going to locate here that was about to locate in Ireland, and that competitor is going to try to hire a bunch of workers, and then the employer that’s not doing anything is going to have to pay his workers more or lose them to the competition. You know the best way to get a pay raise is to get an outside offer, and this tax policy will give us a whole bunch of new outside offers. That’s where the wage effect’s coming from.