35 of 37 economists say Trump’s tax claim is wrong.

The other two say they made a mis­take and mis­read the ques­tion

The Washington Post Sunday - - BUSINESS - BY MAX EHRENFREUND max.ehrenfreund@wash­post.com

Pres­i­dent Trump’s ad­min­is­tra­tion says his tax cut will pay for it­self. It turns out it’s re­ally hard to find an econ­o­mist who agrees.

The Univer­sity of Chicago’s Booth School of Busi­ness reg­u­larly polls economists on con­tro­ver­sial ques­tions. In a sur­vey the school pub­lished this month on Trump’s tax plans, only two of the 37 economists who re­sponded said that the cuts would stim­u­late the econ­omy enough to can­cel out the ef­fect on to­tal tax rev­enue.

Those two economists now say they made a mis­take and mis­un­der­stood the ques­tion.

“I screwed up on that one,” said one of the two economists, Ken­neth Judd, when asked about his re­sponse to Trump’s tax claim. “I meant to say that this is a hor­ri­ble idea, a bad idea — no chance in hell.”

The other re­spon­dent who said that Trump’s tax cuts would pay for them­selves was Bengt Holm­strom, of the Mas­sachusetts In­sti­tute of Tech­nol­ogy, who con­firmed in an email to The Wash­ing­ton Post that he had also mis­read the ques­tion.

Be­sides Judd and Holm­strom, 35 economists said that the tax cuts would not fi­nance them­selves, and five more did not an­swer the ques­tion.

In to­tal, there is not one econ­o­mist in the Chicago poll who be­lieves that Trump’s cuts would pay for them­selves, sug­gest­ing his ad­min­is­tra­tion might not be able to de­liver on a cru­cial prom­ise.

Repub­li­cans have long ar­gued that re­duc­ing taxes will en­cour­age Amer­i­cans to work and in­vest and that the taxes the gov­ern­ment col­lects on those wages and gains from new in­vest­ments will can­cel out the for­gone rev­enue. Now, the Trump ad­min­is­tra­tion is re­ly­ing on that rea­son­ing as it moves ahead with plans to slash taxes with­out bring­ing down gov­ern­ment spend­ing.

Trea­sury Sec­re­tary Steven Mnuchin told in­vestors at a con­fer­ence in Bev­erly Hills that Trump planned to make up for re­duc­ing taxes by stim­u­lat­ing the econ­omy and by elim­i­nat­ing breaks and loop­holes, although the ad­min­is­tra­tion has not of­fered de­tails.

“We ex­pect to pay for this through eco­nomic growth and through elim­i­nat­ing a lot of de­duc­tions,” Mnuchin said.

Mnuchin said that Trump’s poli­cies could ac­cel­er­ate the pace of eco­nomic growth from about 2 per­cent to as much as 3 per­cent a year, but Judd is not buy­ing the ad­min­is­tra­tion’s fig­ures. “The num­bers do not add up,” he said. “We say that about all the pres­i­dents and their plans, and this — this is or­ders of mag­ni­tude worse,” added Judd, who is af­fil­i­ated with the conservative Hoover In­sti­tu­tion at Stan­ford Univer­sity. “The num­bers are just in a dif­fer­ent uni­verse.”

Judd said that not even Pres­i­dent Ron­ald Rea­gan be­lieved that cut­ting taxes would be so great for the econ­omy that the cuts would pay for them­selves. If hir­ing and in­vest­ing did not pick up un­der Trump’s plan, the gov­ern­ment would be forced to bor­row more to cover the dif­fer­ence, and ex­perts warn that the ad­di­tions to the na­tional debt could be­come a bur­den on the econ­omy.


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