How Trump's economic advisor nominee says 3% growth can happen

Key Points
  • Kevin Hassett, a nominee to be a top economic advisor to President Donald Trump, says the administration's 3 percent GDP growth goal is achievable
  • He says it will be driven by boosting labor force growth, capital investment and technological efficiency
Kevin Hassett, Economist.
Adam Jeffery | CNBC

The nominee to serve as one of President Donald Trump's top economic advisors believes the White House's ambitious GDP growth goal is achievable.

But the changes it will take to get there go well beyond chopping tax rates, economist Kevin Hassett said Tuesday.

During a hearing before the Senate Banking, Housing and Urban Affairs Committee on his nomination to serve as chairman of the Council of Economic Advisers, Hassett said, "it's absolutely possible to return to a place where you can get 3 percent growth." He highlighted three key factors: boosting labor force growth, capital investment and technological efficiency.

"We're going to have to get those three things moving," Hassett said.

If confirmed to the job, Hassett would become one of the top economic advisors to a president who has pushed economic growth as his top priority but has faced many questions about how realistic his goals are. The Trump administration is seeking sustained 3 percent GDP growth over time, driven by cutting tax rates on businesses and individuals and slashing regulations on businesses.

The U.S. economy grew only 1.6 percent in 2016.

Trump's pledges to crack down on immigration have led to concerns about the potential for labor force growth, especially as the U.S. population ages. Immigrants to the U.S. "have been an important source of growth," and labor inputs would have to be taken into account when considering immigration policy, Hassett said.

"If there were more workers, we would have more output," he said in response to a question from Democratic Sen. Catherine Cortez Masto of Nevada.

Democratic Sen. Sherrod Brown of Ohio also pressed Hassett on whether 3 percent growth would require real tax reform, rather than only cutting tax rates. Hassett said it is a "fair assessment" that true tax reform would be better.

Tax reform would mean eliminating loopholes or provisions that benefit some taxpayers in conjunction with lowering tax rates.

Hassett previously was an economist at the Federal Reserve Board of Governors, according to the American Enterprise Institute. He advised Republican presidential candidates George W. Bush, John McCain and Mitt Romney in 2004, 2008 and 2012, respectively.