Harvard Economists: Growth From GOP Tax Cuts Will Be Negligible at Best

JM Ashby
Written by JM Ashby

We already know with certainty that the GOP's tax cuts will cost more than a trillion dollars even after accounting for economic growth, but just how much growth we can expect to see remains to be seen.

Now that the dust is beginning to settle and we have a better idea of what corporate America is actually going to do with their tax cuts, economists at Harvard estimate that the law will increase growth by an amount that will only appear in the margins as a rounding error.

From the Wall Street Journal:

The net cost to the Treasury, after accounting for economic growth, would be $1.2 trillion over a decade, according to the paper by the Harvard University economists, conservative Robert Barro and Jason Furman, who was an adviser to President Barack Obama.

The tax law’s provisions would boost U.S. gross domestic product by a total of about 0.4% by the end of a decade, the equivalent of adding 0.04 percentage point to the annual growth rate. The incremental gain would continue beyond that first 10-year period, according to the study.

0.04 percent per year

Trump could just as easily wipe out 0.04 percent growth with a single stupid tweet. He probably already has. You may not care if the market drops 500 points when he announces his next stupid policy, but that costs billions of dollars every time he does it. It could be wiped out by the tariffs he signed today.

This negligible amount of growth could also easily be wiped out by other things beyond Trump's immediate control, such as natural disasters. And, as a bonus, our response to those disasters will probably be entirely deficit-financed, because tax cuts have drained the Treasury.

Growth estimates widely circulated before Republicans passed their tax cuts claimed it could add 0.4 percent growth (or more) every year, not 0.04 percent.

  • theronware

    Talk about smash & grab.

  • muselet

    At the sorts of rates the US had in place, tax cuts were never going to pay for themselves. They were never going to supercharge the economy. They were never going to unleash the potential of the Murcan people. They were never going to make Arthur Laffer’s fantasy real.

    That was never the point of this round of tax cuts. These cuts weren’t even about shoveling even more money upward. These cuts were about ensuring the federal government would not be able to function.

    I’m surprised the cuts would add any growth to the economy at all.