President Trump is planning on cutting taxes, and his advisers have been arguing that he does not need to reduce federal spending at the same time. Instead, they say, reduced taxes will stimulate the U.S. economy to such a great degree that the government will not have to borrow more money to make up the difference.
Economists aren't buying it, according to a new survey conducted at the University of Chicago.
Eighty-four percent of the experts polled disagreed that Trump's tax cuts would pay for themselves through increased economic growth. Just 5 percent said that they would, while the rest did not offer an opinion.
(Update: After this story was published, the economists who said that Trump’s tax cuts would pay for themselves said they had misread the survey. Read more about their views here.)
The figures were published Tuesday by the university's Initiative on Global Markets, which regularly polls a panel of prominent economists for their opinions on issues in the news.
Republicans have long argued that the economic stimulus from reduced taxes will increase the taxes the government collects on wages and investment, canceling out any effect on the government's bottom line. At a conference for investors in Beverly Hills on Monday, Treasury Secretary Steven Mnuchin said that fostering economic growth, along with getting rid of certain tax breaks, would make up for the foregone revenue.
“We expect to pay for this through economic growth, and through eliminating a lot of deductions,” Mnuchin said, adding that tax cuts could increase the rate of economic growth from around 2 percent to as much as 3 percent a year.
Recent tax cuts have not had that effect, however. The economy's performance did not improve after President George W. Bush cut taxes beginning in 2001. Many experts believe that President Ronald Reagan's cuts did have benefits for the broader economy, but not enough that the cuts paid for themselves.
In their comments on the questionnaire, several economists noted that when the White House laid out Trump's priorities and principles for the tax system in a one-page document last week, the outline lacked crucial details. For instance, the document offered scant information about whether larger families would get a break as they do in the current system, how imports and exports would be taxed or what multinational corporations would owe on their earnings overseas.
“I'm not sure it should be called a 'plan,' " wrote David Autor, an economist at the Massachusetts Institute of Technology. “It's so devoid of content.” He added, though, that the information that was available suggested Trump's approach “would be a fiscal disaster.”
Asked whether tax cuts since 1980 have ever paid for themselves in general, no economists argued that they had, although 17 percent said they were uncertain or had no opinion about the question.
“Cutting taxes can stimulate growth, but typically not by enough to increase total revenue collected,” wrote Yale University's Larry Samuelson.