Editorials

EDITORIAL

Larry Kudlow’s specious supply-side tax cut claim

Larry Kudlow, President Donald Trump's top economic adviser, on Friday urged the Federal Reserve to raise interest rates "very slowly." MUST CREDIT: Bloomberg photo by Andrew Harrer
Andrew Harrer/Bloomberg News
Larry Kudlow, President Trump’s top economic adviser.

IF EVER ANYONE needed further proof that supply-side-ism is more theology than economics, and that the truth is not the Trump White House’s specialty, he or she need only consider the recent pronouncement of Larry Kudlow, President Donald Trump’s director of the National Economics Council.

To wit: The Trump tax cuts are paying for themselves.

Sorry, Larry, but the fiscal facts say otherwise.

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Kudlow, mind you, was not educated as an economist. In fact, he doesn’t have an advanced degree at all (though none of that kept him from landing chief economist jobs at Paine Webber and Bear Stearns). But what he lacks in credentials he makes up for in certitude. As Jonathan Chait chronicles in “The Big Con,” his takedown of supply-side economics, in 1993, Kudlow confidently predicted that Bill Clinton’s tax hikes would throw “a wet blanket over the recovery.” Instead, the economy boomed. In December of 2007, Kudlow wished away the economic warning signs on the horizon. “The recession debate is over,” he wrote. “It’s not gonna happen.”

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Enter, like a wrecking ball, the Great Recession.

As a confirmed supply-sider Kudlow believes, contra the evidence, that tax cuts pay for themselves. “The deficit is going to be much lower,’’ he said of Trump’s tax cut back when he was just an informal Trump adviser. “This thing is going to pay for itself.”

Last week, as one of Trump’s top economic advisers, he went further.

“The deficit . . . is coming down, and it’s coming down rapidly,” he averred on the Fox Business Network. Actually, just the opposite. Through May, the deficit is running about $100 billion higher this year than last. According to the latest analysis by the nonpartisan Congressional Budget Office, the national debt will rise to 78 percent of GDP by year’s end and 96 percent by 2028. Yearly deficits will average $1.2 trillion, with total new federal debt accumulation of $12.4 trillion from 2019 through 2028. Even assuming the individual tax cuts expire on schedule at the end of 2025, the Trump cut will be responsible for about $2 trillion of the decade’s total debt accumulation.

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Kudlow later clarified in a way that transformed a clearly erroneous assertion into a merely dubious one. “I meant to say the economy is so strong right now it’s going to produce lower deficits,” he said. “I probably should have said future deficits.”

In the interview in which he wrongly claimed the Trump tax cuts were paying for themselves, Kudlow offered this proud coda: “This is old-fashioned supply-side economics.” When it comes to his false claim about the tax cuts, truer words were never spoken.