David Stockman: Trump's Tax Plan Never Had a Chance
David Stockman served as the director of the Office of Management and Budget in the Reagan administration and is currently a member of the board of the Committee for a Responsible Federal Budget. He recently appeared on Fox Business, and his interview was summarized by the Daily Reckoning. It is reposted here.
David Stockman joined Fox Business and Maria Bartiromo on Mornings with Maria to discuss President Trump’s tax plan efforts and what he viewed as a massive calamity unfolding in Washington.
The Fox Business host began the conversation by asking what he thought on the Trump tax plan proposal. Stockman pressed, “I think it is a one page, $7.5 trillion wish list that has no chance of being enacted and is pretty irresponsible this late in the game.” The host then fired back by asking how the former Reagan budget director placed a price tag on the plan without a score from the Congressional Budget Office.
The author fired back, “The corporate is at 15%, the pass through rate on all unincorporated business is at 15% and that will cost roughly $4 trillion. Doubling the standard deduction will cost over $1 trillion. Getting rid of the alternative minimum will cost nearly $1 trillion.”
When when referencing the Committee for a Responsible Federal Budget (which Stockman is a Board Member of) the author highlighted, “The gross cost is $7.5 trillion and that perhaps the government could earn back $2 trillion through loophole closing and base broadening. My argument is, after ruling out charitable contributions, home mortgages and a Congress that says they won’t touch a health care exclusion… when you go through the math there is no $2 trillion that this Congress and Republican party will even remotely be able to put together.”
When asked about the assumption from Treasury Secretary Mnuchin and Senior Economic Advisor Cohn that new economic growth would pay for the budget Stockman pressed on the facts as he saw them. “Growth always helps, but what they’re failing to realize, and what I learned in the 1980’s is that there is more growth built into the baseline forecast from the CBO than you’re ever going to achieve in the real world.”
“This rosy scenario, which is the current ten-year baseline, assumes 30% more nominal GDP and wage growth per year than we’ve actually had in the past ten years.”
When asked about the conditions in Congress and how else the government could raise revenue he directed, “We have to look at the numbers. There’s $10 trillion of new deficits built in over the next ten years, within the current policy, with rosy scenario economics. If you are going to try to push $2-$6 billion in tax cuts on top of that with $1 trillion of defense increases, $1 trillion for infrastructure in addition to Veteran spending and more – we’re headed for a fiscal calamity. That’s why they can’t pass a ten-year budget resolution that you have to have to get reconciliation for. Without reconciliation there is no tax bill and without that Wall Street is stranded high and dry.”
Trump, Tax Plans and Wall Street
The Fox Business host then asked the Wall Street Journal’s take on Trump’s new tax plan he took on the analysis, “I think the individual tax cut is a mistake. It is today, a rich man’s tax. This is not like 1981. We have indexing with no bracket creep. Today 6 million tax filers out of 150 million, pay half the income tax. If you take the bottom 110 million tax filers, they pay less than 10% of the income tax. We’re at a point where today we should be cutting what people pay. That’s the payroll tax. 160 million people pay that, 15% employer/employee. That’s the job and take-home pay killer.”
When asked what tax areas that the White House and Congress should focus on he pointed, “You ought to put in place a consumption tax or a VAT (value added tax) and use it to pay for a sweeping payroll tax reduction that would put money in the pay envelope of the workers…”
He then urged that the fighting in Congress over the tax proposal in comparison to health care, “It will be worse. They’ll never get it off the ground. Health care didn’t get off the ground. They passed that in the House as a throw away gesture to say they’ve done something. It’s dead before arrival in the Senate and will never see the light of day. Secondly, the Freedom Caucus says if you bring it back with ‘one comma changed’ we’re going to vote it down.”
“The fact of life is there’s going to be no Obamacare repeal, there’s going to be no tax cut, there’s going to be a massive political conflagration. What’s happened in the last few days with Comey and this crazy inquisition on Russia is going to take the government into complete disfunction and partisan ranks.”
To catch the full interview on Fox Business with David Stockman covering Trump’s tax plan find it HERE.
"My Views" are works by members of the Committee for a Responsible Federal Budget, but they do not necessarily reflect the views of all members of the Committee.