When he watched Treasury Secretary Steven Mnuchin and White House Economic Advisor Gary Cohn pitch President Trump’s tax reform proposal to the press and public yesterday, former Secretary of the Treasure Larry Summers thought it was bizarre.
He couldn’t believe that they could suggest losing trillions in revenue with a huge corporate tax cut wouldn’t cause a monstrous deficit because it would be miraculously off-set by massive economic growth.
Summers, who served in Treasury under President Bill Clinton, and has been an advisor to President’s Reagan and Obama, said he felt embarrassed for Trump’s top economic advisors.
“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,” Summers told Vanity Fair, “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.”
The single page, single-spaced proposal passed out at the White House briefing amounted to less than 250 words. There was no attempt to explain how the specifics would impact the federal deficit, and whether the cuts would be permanent or temporary.
Summers put the blame squarely on Trump for rushing out a plan with little detail that was basically a wish list of what cobservations have been dreaming about for years. He felt especially bad for Mnuchin, who was being loyal but he clearly felt not serving himself, his office or the department well:
“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.”
Summers said he would have quit rather than embarrass himself and the Treasury Department in that manner.
Summers suggestion that the long-awaited “phenomenal” tax reform proposal, which Trump has been promising since he was a candidate, was short on details and common sense seems to be backed up by a Bloomberg News report about how it came to be.
Last Friday, Trump blurted out a plan to make his new tax plan public featuring “massive” cuts on Wednesday, as part of his efforts to show he is doing things in his first 100 days as President, a mark he hits tomorrow.
That deadline appears to have been a big surprise for the Treasury department, where more than 100 staff have been working on the proposal.
“The Treasury staffers and counterparts from the White House then rushed to prepare a presentation with enough viable talking points to satisfy Trump’s expectations,” reports Bloomberg “while keeping it open-ended enough to leave room for further consideration.”
Despite the absence of details, there was an immediate controversy over just how much the plan would make the national debt rise in coming years. While the lack of detail made it hard for economists to properly model, some took a shot.
The non-partisan Committee for a Responsible Federal Budget, according to Bloomberg, crunched the data and predicted Trump’s tax reform would cost an additional $3 trillion to $7 trillion over the next ten years. They said it had the potential for “harming economic growth instead of boosting it.”
Like so much of what Trump does, this appears to have been for the reality show in his mind instead of something that in the real world would help all Americans.
His plan would save Trump and his rich friend’s huge amounts and let them pass their estates to their children without interference, but even Mnuchin was tongue-tied about the real impact on the middle class – the people Trump has been promising to help for months.
No wonder Summers, a veteran economist and former President of Harvard University, gave Trump’s fake news tax reforms flunking grades.