Former Treasury Secretary Larry Summers made his distaste for the Trump administration’s tax framework clear last week when he said Republicans were using “made-up” claims about the plan and its effects. Summers expanded his criticism on Tuesday in a blog post that took aim at the report released Monday by the Council of Economic Advisers and chair Kevin Hassett, which seeks to justify the administration’s claim that its tax plan will result in a $4,000 pay raise for the average American family.
Never one to mince words, Summers says the CEA analysis is “some combination of dishonest, incompetent and absurd.” The pay raise figure is indefensible, since “there is no peer-reviewed support for his central claim that cutting the corporate tax rate from 35 to 20 percent would raise wages by $4000 per worker.” In the end, Summers says that “if a Ph.D student submitted the CEA analysis as a term paper in public finance, I would be hard pressed to give it a passing grade.”
One of the authors cited in the CEA paper also has some concerns. Harvard Business School professor Mihir Desai tweeted Tuesday that the CEA analysis “misinterprets” a 2007 paper he co-wrote on the dynamics of the corporate tax burden. Desai’s research has found a connection between business tax cuts and wage growth, but not as large as the CEA paper claims. “Cutting corporate taxes will help wages but exaggeration only serves to undercut the reasonableness of the core argument,” Desai wrote.
Health care spending in the U.S. will grow at an average annual rate of 5.5 percent from 2017 through 2026, according to new estimates published in Health Affairs by the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS).
The projections mean that health care spending would rise as a share of the economy from 17.9 percent in 2016 to 19.7 percent in 2026.
Margot Sanger-Katz and Jim Tankersley in The New York Times: “The deal struck by Democrats and Republicans on Monday to end a brief government shutdown contains $31 billion in tax cuts, including a temporary delay in implementing three health care-related taxes.”
“Those delays, which enjoy varying degrees of bipartisan support, are not offset by any spending cuts or tax increases, and thus will add to a federal budget deficit that is already projected to increase rapidly as last year’s mammoth new tax law takes effect.”
Congress passed a law in 2015 requiring the IRS to use private debt collection agencies to pursue “inactive tax receivables,” but the financial results are not encouraging so far, according to a new taxpayer advocate report out Wednesday.
In fiscal year 2017, the IRS received $6.7 million from taxpayers whose debts were assigned to private collection agencies, but the agencies were paid $20 million – “three times the amount collected,” the report helpfully points out.
Goldman Sachs economists see the tax bill adding 0.3 percentage points to GDP growth in 2018 and 2019 while JP Morgan forecasts a similar gain of 0.3 percentage points next year and 0.2 percentage points the year after.
Goldman’s analysts add that federal spending, which is likely to grow more quickly next year than it has recently, will bring the total fiscal boost to around 0.6 percentage points for 2018 and 0.4 percentage points in 2019.
Both banks see deficits likely rising above $1 trillion, or about 5 percent of GDP, in 2019.