The White House promoted President Donald Trump’s tax cut plan last Friday with a forecast of faster US economic expansion and wage growth, as independent analysts said the plan would swell the budget deficit and provide little spark to the economy.
The rival projections reflected the many unknowns swirling around the plan, expected to be unveiled in legislative form on Wednesday. Republicans were still undecided on some of the hardest parts, such as how to pay for the costly cuts proposed. Weeks and possibly months of debate lie ahead for a project that Trump promised to tackle in his 2016 election campaign.
In September, he unveiled a rough framework for cutting taxes. Now he wants the Congress to approve a bill, which would mark his first major legislative victory, before the end of the year.
The Trump plan for tax cuts of the sort normally reserved for times of economic recession is taking shape in the Congress amid signs the economy is already growing briskly.
Gross domestic product increased at a 3 per cent annual rate in the July-September period, supported by strong business spending on equipment, the Commerce Department said on Friday.
The economic recovery begun under former president Barack Obama after the 2007-2009 recession is in its eighth year and showing little signs of fatigue amid a tightening labour market.
“It’s hard to say that we need to have tax cuts at the individual level… you don’t need to provide further fiscal stimulus when the economy is already strong,” said Bernard Baumohl, chief global economist at the Economic Outlook Group in Princeton, New Jersey.
Faced with improving economic prospects, Republicans have shifted their rhetoric on tax cuts away from getting the economy moving again to keeping it on an expansion track.
An analysis released by the White House economic adviser Kevin Hassett said slashing the top federal corporate tax rate and letting businesses write off the full cost of most capital investments immediately, as proposed in the plan, would bring faster growth and higher wages.
Hassett’s projections envisioned a 3 per cent to 5 per cent increase in GDP that, over 10 years, could represent an additional $700 billion to $1.2 trillion in economic output.
But the Tax Policy Center, a nonprofit Washington think tank, released an analysis that concluded the Trump tax plan would not produce a significant, permanent economic boost.
The group said the plan would reduce federal tax revenue by roughly $2.4 trillion over the next decade and by over $3 trillion in the decade after that, adding significantly to a US national debt that already exceeds $20.4 trillion. — Reuters
David Morgan AND Saqib Iqbal Ahmed