37 top economists all say Trump’s tax plan won’t pay for itself

More than 35 American economists surveyed last week disagree with a basic element of President Trump’s proposed tax plan: whether it will pay for itself. In an unusual display of unity, 100 percent of participating economists rejected the idea this week that Trump’s plans to drastically lower taxes on corporations, business, and individuals will create enough economic growth to offset the lost federal revenue and avoid adding to the national debt.

Two economists initially wrote they agreed the plan would pay for itself, but when emailed by Vox, they both said they’d made mistakes on the survey.

On Tuesday, the University of Chicago Booth School of Business released results from a poll of 42 renowned economists. When asked to evaluate the claim that Trump’s tax cuts will pay for themselves through economic growth, 84 percent disagreed (five of the economists didn’t weigh in). When I contacted the two economists whose opinions differed, they said that their answers were an error, and that they actually disagreed with the claim.

I “screwed up,” Stanford economist Kenneth Judd wrote to me in an email. He misread the question and meant to answer that he “strongly disagreed.”

So it turns out that 100 percent of the economists who participated in the survey doubt Trump can create enough economic growth with his tax cuts. They described the idea as “implausible” and “a deficit stimulus.” Several comments were, by economist standards, acerbic.

Influential MIT economist David Autor “strongly disagreed” with the logic behind the pay-for-itself feature, and explained it this way: “I’m not sure it should be called a plan because it’s so devoid of content,” he wrote. “But absent offsetting tax increases, it would be a fiscal disaster.”

The Trump administration is relying heavily on the notion that his proposed cuts would spur so much economic growth that money will flood the US Treasury as a result. It’s a convenient idea, because it releases his administration from the hard task of deciding where to raise taxes to offset deficit-swelling cuts. Trump’s plan does call for eliminating most tax deductions, though that would hardly make up for the estimated loss of up to $5 trillion or more in the next 10 years.

Calculating the cost of tax cuts will be crucial to the success of tax reform. The easiest route for Republicans is to get a bill passed through budget reconciliation, which only requires a simple majority in the Senate. But the legislation would have to be revenue-neutral and not add to the deficit after 10 years.

Last week, Trump released a one-page plan of tax cuts he would like Congress to pass. It lacked key details, but it centered on lowering the tax rate on corporations and businesses to 15 percent, reducing individual rates, and doubling the standard deduction for individual taxpayers.

The Chicago panel is highly skeptical that such a plan would not add to the deficit.

As Harvard economist Oliver Hart wrote: “We do not have the details of the plan but it is very implausible that it would pay for itself.”

Or University of Chicago economist Michael Greenstone: “It wasn’t a fleshed out plan, but based on what was announced the probability that it will increase the deficit is very high.”

The panel of economists also overwhelmingly agreed with the claim that in the past 30 years, tax revenues have generally fallen when lawmakers rely on optimistic assumptions about the economic impact of tax cuts.

Here’s what University of Chicago economist Austan Goolsbee said about the resulting loss in revenue: “You can quibble with phrasing, but that’s the consensus of the research literature (that none of the advocates ever seem to check).”