Former Reagan Budget Director David Stockman doubts President Donald Trump’s tax cuts will spur four percent economic growth in the U.S. economy.
“Absolutely not. Not a snowball's chance,” Stockman, who was the Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan, told Fox Business Network.
Trump repeatedly attacked the weak GDP rates during the campaign as an example of the Obama administration's failed economic policies. He said his program of tax cuts for individuals and businesses, deregulation and tougher enforcement of trade agreements would double growth to 4 percent or better, Reuters reported. Treasury Secretary Steven Mnuchin said he believed growth above 3 percent would be achievable.
“What we have now is an economy that is so impaired with debt. $64 trillion, not one or two. A government that is so buried in deficits and debt that it couldn't do the kind of massive deficit finance tax cuts that happen under Ronald Reagan,” said Stockman, who served as a Republican U.S. Representative from the state of Michigan (1977–1981).
“We had deep recession in '81 and '82. The Fed had to slam on the brakes because the double digit inflation from Jimmy Carter. The economy then did bound back when (then Federal Reserve Chairman Paul) Volcker got the inflation job done, took his foot off the brake. Allowed the financial system to start expanding and the tax cuts helped,” he said.
Volcker is an American economist who was chairman of the Federal Reserve under Presidents Jimmy Carter and Ronald Reagan from August 1979 to August 1987
Stockman said the same issues that haunted him and lawmakers a generation ago still linger today.
“We needed to reform Social Security, wouldn't touch. Needed to reform Medicare, wouldn't touch. Needed to reform farm subsidies, they wanted to keep it going. We needed to get community development and national endowment for the arts, all the things that Donald Trump wants to cut today, I left in the vault at OMB as failed cuts from 1981 because Republicans wouldn't cut them.”
The U.S. economy has grown by 3.2 percent a year on average since 1947, but never exceeded 3 percent during the Obama administration, the first time in history. Trump’s proposed budget is based on tax and spending cuts to strengthen economic growth without increasing the deficit.
To be sure, private economists are more skeptical of Trump's lofty goals. They are forecasting growth of this year around 2.2 percent. That would be an improvement from last year's 1.6 percent, the weakest showing in five years, but far below Trump's goal.
Many analysts believe that the impacts of Trump's economic program will not be felt until 2018 because they are not expecting Congress to approve some version of Trump's tax program until late this year.
However, one of the most respected economic gurus of our time is holding out hope that somewhat robust economic growth will flourish under Trump.
Larry Kudlow, the economic guru and former adviser to President Ronald Reagan, said waning productivity is holding back U.S. growth. Corporate profitability is growing the most since 2011, but gross domestic product has barely risen.
“We had big, big profits numbers in the S&P 500. Most of that was overseas, internationally driven,” Kudlow said on CNBC. “If you take out that and the banks, the actual profits are much less.”
Kudlow said President Donald Trump’s proposed 2018 budget will help to accelerate economic growth by 3.5 percent to 4 percent a year.
“Roll back regulations and grow, grow, grow. Three percent, in my opinion, is minimal,” Kudlow told CNBC. “They can do 3.5 percent to 4 percent if they get the tax cuts through ASAP.”
(Newsmax wires services contributed to this report).
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