Increments

I see that I’m largely in agreement with the Committee for a Responsible Federal Budget about the likely effects of the tax cut being considered:

Increasing growth by 0.4 percentage points on a sustained basis might sound doable, but such an increase actually means raising projected growth rates by more than one-fifth and is unlikely to occur because of tax reform alone.

Certainly, policymakers should work toward enacting reforms to improve economic growth by as much as possible, and tax reform is one critical piece of a comprehensive growth plan. But the tax reform plan under consideration is unlikely to generate more than 0.1 percentage points of increased growth per year, and over the long run it may actually slow economic growth. Lawmakers should not pretend otherwise but should instead both work to improve the bill and enact other pro-growth policies, including improving the debt trajectory, entitlement reform, regulatory reform, and labor market improvements.

What is needed is much more targeted reform. Other reforms that should be considered include trade reform (more reciprocity), reforms specifically designed to encourage domestic business investment, and immigration reform.