Two of America’s top economists appeared on ABC’s This Week to debate the potential impact of the GOP tax plan. Liberal economist Paul Krugman, a Nobel Prize winner, and conservative Glenn Hubbard, a top official in the George W. Bush administration, have differing views on how the tax overhaul will affect the economy.
“I have been looking–what do the markets think? Never mind the stock market. If you’re going to cut taxes on corporations, you would expect the stocks to go up. A better judge would be, look at the dollar. If this bill does what they say it’s going to do, scads of money pour in. Corporations will bring money back home, invest it here. All of that should lead to a surge in the dollar,” explained Krugman. “In fact, the dollar has done nothing. The dollar rose when Trump was elected because people thought the infrastructure plan was going to happen. Then it went back down again. It’s actually lower than it was on Election Day. What the markets are saying is, this is a big nothing burger. The markets are saying they don’t expect any significant economic boost.”
Hubbard, asked what impact the plan might have when the economy is already doing well, disagreed with Krugman’s assessment. “I think it will do two big things. One, in the short run, it will provide some boost to demand. I think the Fed would probably look forward to that. In the longer run, the issue is on the supply side. The tax bill could probably raise GDP by about 3 percent in the long run. That’s not the beginning of a new era, but it is certainly very, very positive for the economy. Economists have long campaigned on tax reform as the biggest single policy weapon.”
Watch the full discussion below.