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Economic policy expert Austan Goolsbee shared his view that reckless tax cutting could actually hamstring GDP growth in an exclusive interview with CNBC PRO's Mike Santoli.
"I think you've got to be careful just calling for cutting the corporate tax rate and paying for it some way that you don't specify," argued Goolsbee. "Because you could easily undermine the growth rate of the country to do that.
"You could give a windfall to a bunch of stuff that's already been built and if you paid for that by eliminating say, deductions for investment ... Some of the reasons why we have these exemptions were precisely to try to get the highest bang for the buck on growth."
Goolsbee is a professor of economics at the University of Chicago's Booth School of Business. He served in Washington as President Barack Obama's chair of the Council of Economic Advisors and a member of the president's Cabinet. He also served as chief economist of Obama's Economic Recovery Advisory Board. Goolsbee remains a leading voice on government policy and the economy.
Last week, Senate Republicans approved a $4 trillion budget measure, taking a crucial step toward President Donald Trump's goal of passing a tax plan this year. Among the variations, the Senate proposal would allow for tax cuts to add $1.5 trillion to the deficit over a decade. In contrast, the House called for a revenue-neutral proposal.
But some economists and politicians are skeptical of further exacerbating the current national debt. For his part, Goolsbee stressed caution toward any bill that could add significantly more to the deficit.
"I've been an advocate of cutting the corporate tax rate and trying to do that as one does in tax reform like the tax reform act that Ronald Reagan did in a revenue-neutral way," the economist said. "We're not in a recession; this is the second-longest boom on record. During boom times is not when you want to start running up the deficit."
The GOP has yet to introduce a solidified tax plan. The process of crafting the official legislation will start as soon as the House and Senate pass a budget resolution.
Even amid challenges, Trump and McConnell this week said they still want to pass a tax plan this year.
"The economy can't go back to doing what it was doing before the recession began," said Goolsbee, referring to lower-than-anticipated GDP growth. "The argument that there's a whole lot of slack, that if we would just go flip a switch or turn a dial we would increase the growth rate in the country to 3 or 4 or the president said 6 percent ... the evidence doesn't really support that."
See here for the full CNBC PRO report and interview video.