3.5% economic growth is possible with GOP tax cuts, says House Financial Services chair

Key Points
  • The votes will be there to pass the GOP package of tax cuts for American workers and corporations, predicts retiring Rep. Jeb Hensarling.
  • The House Republican tax reform bill is being unveiled on Thursday, a day later than planned.
  • With the tax plan, Hensarling says, "we're capable of maybe 3.5 percent economic growth."
Rep. Jeb Hensarling: 3.5% economic growth possible with GOP tax cuts

The House Republican tax reform bill that's being unveiled on Thursday morning could boost long-term economic growth above the Trump administration's goal, said retiring Rep. Jeb Hensarling.

President Donald Trump, while talking about growth as high as 4 percent on the campaign trail, has been focusing lately on sustained gross domestic product advances of 3 percent.

Hensarling, chairman of the House Financial Services Committee, told CNBC's "Squawk Box" on Thursday he believes the votes will be there to pass the GOP package of tax cuts for American workers and corporations.

"What I would encourage my colleagues to look at ... the difference between 3 and 3.2 [percent] economic growth versus 1.5 to 2 percent economic growth under the Obama plan," the Texas Republican said ahead of the unveiling of the tax plan.

"We are now finally, finally after a decade, seeing wages rise for working people. And right now under President Trump, we've had two quarters of 3 percent economic growth, and that's even without this plan," Hensarling said. "I think we're capable of maybe 3.5 percent economic growth. That's going to be make a huge difference to everybody."

However, many Democrats, including former Obama Treasury Jack Lew, believe the economy is not capable long-term growth of even 3 percent.

On CNBC Wednesday, Lew predicted sustained GDP growth "north" of 2 percent.

"We have demographic issues that are just a constraint that anyone would face right now," he said, warning that denying such factors "could lead you to make big mistakes."

One of those mistakes would be to implement the approach to tax reform that Republican leaders advocate, Lew said, arguing the U.S. can't afford it.

Jack Lew: Just lowering tax rate won't necessarily lead to increased growth

Trump and Republican tax writers counter by saying any tax cuts would be paid for by the accompanying bump in economic growth. But Democrats, like Lew, believe the potential impact of GOP tax cuts should be judged without factoring in any economic change.

Hensarling, who announced on Tuesday that he will not run for re-election, said the GOP tax plan won't make lobbyists very happy but Americans and U.S. companies should be pleased.

Unlike other GOP lawmakers who have recently decided to retire, Hensarling was not in danger of losing his seat. The 60-year-old was first elected to Congress in 2002.

Hensarling told CNBC Thursday the reasons he wanted to retire were to spend more time with his kids before they go off to college and that he never intended to stay in Washington forever.