Republican presidential nominee Donald Trump's advisers believe his tax plan will supercharge economic growth, and they have long criticized any analysis of the plan that does not adopt that view. It's why they were so dismissive of the Tax Policy Center's recent finding that his plan would pile an additional $6.2 trillion on the national debt over the next decade; Trump's team called the report a “fraudulent analysis” because it didn't include what economists call a dynamic score, which is to say, an estimate of how the plan would affect growth.
Almost on cue, two new “dynamic” analyses of the Trump plan have appeared in recent days. One of them suggests that growth effects would make his proposals more affordable, though still expensive. The other suggests that the Trump plan would actually slow economic growth in the long run.
The rosier scenario for Trump comes from economists at the conservative American Enterprise Institute, who built an open-source model for estimating the effects of tax policy changes. Their analysis estimates that Trump's plans to cut corporate taxes would not cost the United States as much as others have projected — in part because cutting the corporate rate would encourage multinational companies to classify more of their income as domestic, and taxable under current law.
AEI's Kevin Hassett, who was an adviser to Mitt Romney's 2012 presidential campaign, goes on to estimate other ways in which growth effects could reduce the cost of Trump's proposed individual income tax cuts. He concludes: “Once one thinks through all the effects that such a big tax change might have, we are left with a range for a reasonable score trillions of dollars lower” than the Tax Policy Center's $6.2 trillion estimate.
The less-Trump-friendly assessment comes from the Penn Wharton Budget Model, a budget scoring team at Trump's alma mater. The Penn team ran Trump's plan through a policy simulator and concluded that, yes, it would stimulate more economic growth in the short run.
But the model estimates that the stimulus would fade, because Trump's plan would add to the debt and dampen economic growth by crowding out private investment and savings. (Trump's campaign, we should note, insists that his proposals to cut federal spending, boost energy exploration and change the balance of international trade would make his plans revenue-neutral, meaning that he would not add to the current rate of increase of debt.)
The Penn analysis does not take Trump's other plans into account. (Neither does AEI's.) The same goes for Penn's analysis of Hillary Clinton's tax plan, which it finds would slow growth a bit in the short run but boost it in the long run, because Clinton's tax increases on the rich would reduce federal debt.
The long-term result, though, relies on a complete disregard of the rest of Clinton's economic plan, which includes more than $1 trillion in new government spending programs. She's not proposing to bring down the debt, she's proposing to balance her new spending with tax increases, and if you take those proposals at face value, the growth benefits from Clinton's plan in the model would fade away.