Published by Jeff Cox, CNBC
April 27, 2017
President Donald Trump‘s plan to roll back taxes in the hope that doing so will generate robust economic growth with little impact on debt and deficits is “absurd,” former Treasury Secretary and White House economic advisor Larry Summers said.
In fact, Summers added in an interview with CNBC, that had he been asked to present such a plan with the notion that it would pay for itself, he would have refused.
“If I had been asked by the White House to assert a proposition as demonstrably false as the claim that this plan would produce revenue, I would have resigned rather than put the credibility of the department behind a proposition that no one with real experience would believe was true,” he said.
The cornerstone of Trumps’ economic agenda is that, as well as simplification of the tax code, it will unlock growth, which was strong under Clinton but plodding under Obama.
In a proposal rolled out Wednesday by Treasury Secretary Steven Mnuchin and Gary Cohn, Trump’s chief economic advisor, the number of individual tax brackets would be cut to three and the levels for wage earners across the board would be reduced.
In addition, the plan would slash business taxes and give companies a much lower tax rate for profits earned overseas and brought back to the U.S.
Summers said he was surprised at the apparent lack of thought in a proposal that was presented as a single-page document.
“Most presidential campaigns during the primaries, when they put out a tax plan, they put out more than one page. They put out some analysis, some models, some careful articulation of the proposal and estimate its effects,” he said.
“There’s none of that coming from the administration, and yet there’s this confident statement that it will pay for itself,” Summers added. “I don’t know how they could possibly know without having done economic work.”
Comparing the Trump tax-cut plan to those launched by predecessors including Ronald Reagan and George W. Bush, Summers said there are arguments on both sides about their net effects.
However, he said, there is “no — no serious read of the evidence to suggest that they came close to paying for themselves by stimulating economic growth.”
Summers said sending out the Treasury secretary to make that claim undermines the office.
“I just don’t understand what could cause an administration to put its secretary of the Treasury in a position to assert something … that is generally regarded by economists as absurd,” he added.
Still, White House budget chief Mick Mulvaney said Thursday that the Trump administration intended for its initial tax plan to be vague and that assessing its long-term impact is difficult right now.