Discussing Taxes with Kevin Hassett
ZAKARIA: Washington D.C. is abuzz about taxes. This week, the president talked about his tax plan on "Fox News", of course. From the podium, Sarah Sanders talked about it. Even Ivanka Trump went up to Capitol Hill to lobby for it. Often mentioned is the extra money that the Trump team is promising is going to go directly into the wallets of the American people. Listen to what the president had to say last week with the Senate Finance Committee.</s>TRUMP: So, each household on average would take in $4,000 and they'll go out and they'll spend that money and that will be great for the economy.</s>ZAKARIA: Sounds good, but is it true? Well, Trump didn't come up with the number alone, of course. It comes from a report by Chief White House Economist Kevin Hassett. We'll hear from Hassett in a moment, but first Larry Summers. Summers was the 71st Secretary of the Treasury, serving under President Clinton. He headed the National Economic Council under President Obama and was President of Harvard University. Larry summers, pleasure to have you on.</s>LARRY SUMMERS, FORMER SECRETARY OF TREASURY: Glad to be with you, Fareed.</s>ZAKARIA: So, you have said in "The Washington Post" that as treasury secretary, undersecretary, deputy secretary, you have worked with seven chief economists for the White House, seven heads of the council of economic advisors, and you have never come across an analysis that you described as dishonest in the way that this is dishonest. Explain what you mean by that.</s>SUMMERS: Look, the jobs to do economic analysis and different economists will have different perspectives, but each of the previous people in the job have taken positions that were well within what professional economists believed and argued regarding the effect of policies. And the claims here that you'd see an increase of $4,000 to $9,000 in a typical family's income from a corporate tax cut are just outside the range of what the economics profession believes. Even the people who have come down most squarely on Kevin Hassett's side on the op-ed page of "The Wall Street Journal" come up with estimates far below the lower end of his range. So, he's trying to help the administration politically, I guess. But the analysis is really of remarkably low quality. And that's why I chose to speak so critically of it. I've written critically and in disagreement with things that the Bush administration did, various Republican congressional proposals have tried to do, but the claims that this administration makes that the tax cut will pay for itself, that the tax cut will raise incomes more than anything else that's happened in the country in many years, that the tax cut isn't skewed towards helping rich people, those are fake facts. And I think they need to be called out as fake facts. Is corporate tax reform a good idea? Yes. Will it have some positive impacts? Yes. Are the claims being made by the administration valid? I think not. Is the corporate tax reform they're proposing well designed to help the economy and the middle class rather than be a giveaway to the very fortunate? I don't think it is well designed in that regard.</s>ZAKARIA: Basically, as I calculated it using some of your analysis, the tax cut, if you work it out per American worker is about $1,300 per worker. And you say, Kevin Hassett assumes that when you give $1,300 to every American worker in the form of a tax cut passed through by corporations, his or her wages will rise by $4,000 or even $9,000. That seems - it's difficult to understand how that would happen.</s>SUMMERS: Yes. Look, I think what Kevin Hassett assumes is that when you give that corporate tax cut, you're giving it to corporations and that the corporations in response will decide to grow and that that's what will create the higher wages. The problem is that maybe the corporations will just keep the money and pay it out in the form of higher dividends or doing more repurchases of shares. And even if they do grow somewhat, how much will they grow. And in order to finance that corporate tax cut, you're going to need to do something else like borrow money which is going to drive up interest rates and have adverse effects on the economy. So, the idea that this tax cut is going to be enough to raise incomes by anything like the suggestion seems a highly implausible one.</s>ZAKARIA: You said that if Kevin Hassett had submitted his testimony or this proposal to you and he were a student at Harvard in an economics course you were teaching, you would have failed the paper. Do you stand by that?</s>SUMMERS: Yes, I do. I would have failed the paper because it was egregiously selective in the use of evidence, because it didn't defend the plausibility of its conclusions, because the methodologies were very far from the state-of-the-art methodologies in economics, and because professional economic analysis is supposed to be analytical and objective rather than constituting a political brief. If I taught a course at Harvard in campaign management and somebody presented a paper like that as an example of what a presidential campaign political document would look like, I might have thought it was a pretty good political document making that case. But what's always been special about the Council of Economic Advisers is that it has stood heretofore for objective professional economic analysis, not the kind of stuff that campaign staffs produce or White House political staffs produce. What disappointed me about Kevin's work was not that I had never seen any document like that before, but that I had seen them only from campaign or White House political staffs before, never with the imprimatur of the Council of Economic Advisers.</s>ZAKARIA: Larry Summers, good to have you on.</s>SUMMERS: Thank you, Fareed.</s>ZAKARIA: Next on GPS, meet the man who wrote the report that says the average American household will find an extra $4,000 under the Trump tax plan. Kevin Hassett, the chair of the White House Council of Economic Advisers, when we come back.