Larry Kudlow, the Reagan administration economist who advised the Trump campaign on fiscal policy, said President Trump’s tax cuts on businesses will mostly benefit workers and wage earners.
Kudlow made the remarks while debating the effects of tax reform with Gene Sperling, the economist who worked for the Clinton and Obama administrations, on CNBC. Kudlow forecast that a boost in economic output will help to pay for the tax cuts as businesses ramp up spending and investing in the U.S.
“We can get 3 percent growth, and I think business tax cuts are going to benefit working folks and wage earners most — add to productivity,” Kudlow said. “We’ll get the best investment boom in 20 years-plus.”
Deficits are projected to grow $7 trillion over the next decade as the United States keeps borrowing record sums of money, the New York Times reported. That number could double if the economy is weaker than forecast or if the $3 trillion in spending cuts the White House seeks don’t materialize in Congress.
Sperling argued that the tax cut will mostly help big corporations that won’t share the windfall with workers and will negatively affect the economy as interest rates rise and damp investment.
“They [Republicans] said, ‘Let's borrow $1.5 trillion that the American people have to pay back, have that deficit go up; we'll give most of that money to large companies and well-off people that don't need that,” Sperling said. “That really is what worries me, which is that they have, for no reason, created a huge deficit.”
Kudlow said Obama had record-setting deficits, but with a different policy prescription for reviving the economy from the worst recession in 80 years. He said Trump’s budget includes proposals to cut spending, although it remains to be seen whether Congress will be willing to pare back social programs.
“Budgets are statements of policy. You may not … get the policies Trump is going after: entitlements, Medicaid, Medicare, small entitlements, work-type issues,” he said. “He is on the right track in terms of policy discussion. In terms of debt, Obama took it as a share of GDP from 52 percent to 77 percent.”
Kudlow and Sperling also discussed a proposed $20 billion boost in infrastructure spending.
“He [Trump] has put forward an infrastructure plan which is advertised as $20 billion a year, but when you take out cuts it does to other infrastructure, it’s probably $2 billion a year,” Sperling said. “It is going to lead to very little that puts people to work, increases productivity of the country.”
“I will defend Trump's infrastructure plans. He doesn't want it to be a public works program,” Kudlow said. “He is reforming infrastructure with respect to the time of applications and probably local labor laws; $200 billion is not a big number over 10 years … the rest is going to the private sector.”
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