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.”