– By Robert U. Ayres
For several weeks, the guys and gals at CNBC and Bloomberg News, and their guests, have been talking about the coming tax reform (cut) legislation that the Republicans finally seem to have in their grasp. Well, maybe not exactly reform, maybe not revenue-neutral, but at least tax cuts for the corporations that give them campaign money. All the cheerleaders, both in Congress and the White House, assert confidently that faster growth will pay for the cost of the tax cut, even though virtually all economists (including me) say that it won’t.
With straight faces, the salesmen for the Trump tax cut have promised a miracle: increased corporate profits, a surge of investment in CAPX, more and better jobs with higher pay, all to be paid for by accelerated economic growth. In fact, the all-white, all male finance committees of both Houses of Congress, with Treasury Secretary Mnuchin and Chief Economic Advisor Hassett say that the US will grow at 3% p.a. or more for the next ten years – no recessions – and that the tax cuts will actually generate a profit for the government of $300 billion in that time. Sadly (and no irony intended) this combination of goodies is a pipe dream. In the next few paragraphs I will explain why, and why Trump and the Republicans are selling snake oil to the suckers. What is surprising is how many financial professionals are buying it.
If I had the job of preparing a model constitution today, I would start with . . .