Steven Mnuchin, former hedge fund manager, Hollywood producer, Goldman Sachs executive, and president-elect Donald Trump’s choice for Treasury Secretary, is hoping that it will be Morning In America all over again. Mnuchin is proposing the biggest tax cuts since the Reagan Administration.
“There will be a tax cut for the middle class,” Mnuchin told CNBC’s “Squawk Box”, reports USA Today. “Any tax cuts that we have for the upper class will be offset by less deductions to pay for it.”
He added that the top business tax rate of 35 percent will be cut to 15 percent, in addition to Trump’s proposal of a 10 percent tax rate on monies held overseas by companies.
“We think by cutting corporate taxes we’ll create huge economic growth and we’ll have huge personal income, so the revenues will be offset on the other side,” he continued. “I think we can absolutely get to sustained 3% to 4% GDP. And that is absolutely critical to the country. To get there, our No. 1 priority is tax reform. This will be the largest tax change since Reagan.”
But not everyone is on board with Mnuchin’s proposals.
Paul Krugman, the Nobel Prize-winning economist, and New York Times columnist, agrues that Mnuchin’s trumped up Reaganomics won’t work because Reaganomics itself never worked.
“I understand why conservatives want to rewrite history and pretend that these good things happened while a Republican was in office — or claim, implausibly, that the 1981 Reagan tax cut somehow deserves credit for positive economic developments that didn’t happen until 14 or more years had passed,” Krugman wrote in 2008, reports the New York Times.
“Like Ronald Reagan, President Bush began his term in office with big tax cuts for the rich and promises that the benefits would trickle down to the middle class,” he continued. “Like Reagan, he also began his term with an economic slump, then claimed that the recovery from that slump proved the success of his policies.”
In 2013, Krugman pointed to annual growth rates in median family incomes from 1973 to 2007.
For the period 1973 to 1979, the rate of growth was roughly 0.6 percent. For 1979 to 1990, the Reagan ear, rates dropped below 0.4 percent. And then from 1990 to 2000, under President Clinton, the rate rocketed to almost 1.2 percent.
“These periods don’t match up neatly with presidential terms,” Krugman wrote. “Still, if Reaganomics had been such a spectacular success, you would have expected the results by 1990 to have been families doing better than in the horrible 1970s; actually, not.”
But president-elect Trump remains optimistic of Mnuchin’s GDP growth predictions. In September, citing a 3.5 percent GDP growth rate projected by economic team, Trump told the Economic Club of New York, “I think we can do better than that.”
Sources: USA Today, New York Times, (2) / Photo Credit: Fox News/Instagram