Kevin Hassett Spanks the Tax Policy Center

By Larry Kudlow President Trumps new chair of the Council of Economic Advisers Kevin Hassett walked into the lions den last week with his first official speech. He used the moment to pound the leftist Tax Policy Center. It was a wonderful sight. When Hassett wasnt pounding the TPC he was spanking them. He took them to the woodshed and disciplined them in public view. Hassett rightfully accused the TPC of ignoring widely accepted economic literature for using false assumptions on tax details that have never been published and for manufacturing income-redistribution (tax cuts for the rich) and deficit numbers that dont even exist. Its inaccurate he said. Its fiction. In perhaps his toughest criticism of all Hassett called the TPCs findings scientifically indefensible. Theres no greater insult among academics. Its a pity that mainstream media outlets refer to the TPC as nonpartisan. Theyre not. TPC staff is chock-full of former Obama economists. But Hassett has shown no fear. Kevin Hassett is the new face at the highest economic level of the Trump administration. But hes no neophyte. He has a Ph.D. in economics from the University of Pennsylvania. He has spent time on the staff of the Federal Reserve Board in Washington. He taught at Columbia Business School. He was a long-time economic-policy director at AEI. And hes well-liked by everyone who knows him. Plus hes smart. Very smart. Not only did he chastise the TPC but he also schooled them on a number of important tax policies that have become mainstream thinking inside the Trump White House. Sighting numerous peer-reviewed papers Hassett reminded his audience of a plain truth: Taxes matter. They impact the economy. Economists who have studied the effects of taxes over time have discovered a consensus he said. Lower marginal tax rates and a broader base increase the rate of economic growth and well-being. He continues: For years TPC analyzed tax bills without providing dynamic scoring but now provides a dynamic score but with zero effect. For me Hassetts biggest contribution to the tax debate is the notion that high corporate tax rates depress the wages of workers. Because companies have stashed profits overseas and because the U.S. tax cost of investment is so high middle-income wage earners have suffered mightily. Hassett -- and his AEI colleague Aparna Mathur -- have argued for over a decade that if you want to raise wages cut corporate tax rates. During his TPC speech Hassett noted that for the median household in the U.S. the top corporate marginal rate cut from 35 percent to 20 percent would boost wage growth almost four-fold. In his past work Hassett has argued that 70 percent of the benefits of lower business tax rates accrue to middle-income wage earners -- in other words Donald Trumps middle-class base. Trumps tax cuts are not handouts to the rich as the redistributionist Democratic left argues. Everyone benefits from these lower tax rates. As JFK put it a rising tide lifts all boats. The growth ignited by lower tax rates solves all problems. Class warfare has never worked in American politics. But Trumps tax plan will help middle-income wage earners the most. Theres nothing wrong with that. Backing up Hassetts assertions former CEA chair Glenn Hubbard recently wrote in the Wall Street Journal that too many economists fail to consider the share of the U.S. corporate tax burden borne by labor -- 60 percent according to his research. Neither the TPC the Congressional Budget Office nor the Joint Tax Committee model these results. Instead they ignore the evidence. A recent analysis of the House tax plan -- which is nearly identical to the Trump plan -- by professors Alan Auerbach (University of California Berkeley) and Laurence Kotlikoff (Boston University) concluded that it would boost wages by 8 percent. Thats a big number. Its the difference between a prospering and optimistic middle class and a pessimistic middle class that lives day to day paycheck to paycheck. I look at it this way: Trumps tax-cut and regulatory-rollback policies are aimed directly at ending the war on business which has dragged down the economy for nearly two decades. Lets reward success rather than punish it. In just eight months this growth message has generated a whopping increase in business and consumer confidence. The economy is picking up steam. The stock market has been on a tear. This is not a coincidence. If Trump continues to link large- and small-business tax cuts to the well-being of the wage-earning middle class hell score economic victories across the board. At the same time America will regain the populist prosperity thats been the backbone of our democracy for nearly 250 years. Thats right. As I sometimes put it free-market capitalism is the best path to prosperity. Its comforting to know Kevin Hassett is burning this torch down in the swamp of Washington D.C.