President Donald Trump's new Council of Economic Advisors chair, Kevin Hassett, walked into the lion's den last week with his first official speech. He used the moment to pound the leftist Tax Policy Center (TPC).
It was a wonderful sight.
When Hassett wasn't pounding the TPC, he was spanking them. He took them to the woodshed, and disciplined them in public view.
Hassett rightfully accused the TPC for 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 don't even exist.
"It's inaccurate," he said. "It's fiction."
In perhaps his toughest criticism of all, Hassett called the TPC's findings "scientifically indefensible." There's no greater insult among academics.
It's a pity that mainstream media outlets refer to the TPC as "nonpartisan." They're not. TPC staff is chock-full of former Obama economists.
Hassett, however, has shown no fear. He is the new face at the highest economic level of the Trump administration, but he's no neophyte. He has a PhD 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 American Enterprise Institute (AEI).
And he's well-liked by everyone who knows him. Plus, he's smart—very smart.
Not only did he chastise the TPC, he 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." [Italics mine.]
He continued: "For years, TPC analyzed tax bills without providing dynamic scoring, but now provides a dynamic score, but with zero effect."
For me, Hassett's 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 Trump's middle-class base.
Trump's tax cuts are not hand-outs to the rich, as the redistributionist Democratic left argues. Everyone benefits from these lower tax rates. As President John F. Kennedy put it, a rising tide lifts all boats. The growth ignited by lower tax rates solves all problems.