'You're making stuff up' — Democrat Barney Frank says there's no way the US can sustain 3% economic growth

Key Points
  • Tempers flared in a CNBC debate between former congressmen Barney Frank and Jeb Hensarling over whether the Trump tax cut can keep the economy chugging.
  • Tax cuts and deregulation under Trump will continue to boost the economy — and, in turn, help reduce the budget deficit, says the GOP's Hensarling.
  • "You're making stuff up," argues Democrat Frank, adding that "no one thinks we're going forward with the 3 percent."
Watch two former congressmen debate tax proposals from the left and the right

A CNBC debate Tuesday between Democrat Barney Frank and Republican Jeb Hensarling became heated as the two former House Financial Services Committee chairmen argued over whether the tax cut championed by the GOP and President Donald Trump can keep the economy growing at 3 percent.

At one point during the "Squawk Box" exchange, they were talking over each other, and Frank broke in and said to Hensarling, "Neither one of us are the chairmen anymore. So neither one of us can tell the another to stop talking and interrupt."

Hensarling laughed in response, and then Frank continued by saying, "No one thinks we're going forward with the 3 percent."

"But you're wrong," Hensarling countered. "Three percent economic growth is simply the average of the post-war era. All we're trying to do is rid ourselves of the legacy of Obama." The Texas Republican argued that muted economic growth in the previous administration was caused by former President Barack Obama's restrictive tax and regulatory policies.

Tax cuts and deregulation under Trump will continue to boost the economy — and, in turn, will help reduce the nation's budget deficit, Hensarling said.

"You're making stuff up," Frank, who represented Massachusetts in Congress, said to Hensarling, who responded by saying: "I'm making up 3 percent economic growth?"

Frank then argued that Trump's 2017 tax reform was just a "short-term boost" to the economy that won't last long enough to help bring down the soaring deficit. "The notion that the tax cut was going to pay for itself has clearly not been the case," Frank added.

The CNBC Rapid Update, tracking gross domestic product forecast changes, pegs growth in the fourth quarter at an average of 2.1 percent. The initial look at Q4 data, delayed by the partial government shutdown, is set for release Thursday.

GDP advanced 2.2 percent in the first quarter, 4.2 percent in the second quarter, and 3.4 percent in the third quarter. Trump administration officials are hoping for 3 percent growth for all of 2018. That's a level the president has used as a yardstick of success.

Earlier in the interview, a discussion about Democratic proposals to increase taxes on the wealthy to pay for liberal initiatives like the Green New Deal drew sharp rebuke from Hensarling.

"The 1 percent make roughly 24 percent of the income but pay 40 percent of the taxes," he said, asking why they should pay more.

Frank countered by saying the power of far-left Democrats who support the Green New Deal, proposed by firebrand freshman Rep. Alexandria Ocasio-Cortez from New York, are not the mainstream of the party.

But Hensarling said Green New Deal Democrats are not outliers, pointing out that every senator who has announced a run for president against Trump in 2020 has expressed support for the idea of a Green New Deal. Ocasio-Cortez's proposal calls for generating 100 percent of the nation's power from renewable sources within 10 years.