Apr 20, 2017

Trump tax cuts won't be paid for

Andrew Harnik / AP

The Trump Administration has no plans to pay for its proposed tax cuts, according to revealing comments made Thursday by top White House officials Gary Cohn and Steve Mnuchin at an Institute of International Finance conference. There will be no border adjustment tax — the trillion-dollar hike on imports raised in Paul Ryan's plan — nor any other big new revenue generators.

Both Cohn and Mnuchin said economic growth would be the primary way to pay for corporate and individual tax cuts, while fewer deductions and tax simplification would also play roles. It is not an opinion that is widely shared by on Capitol Hill, including among Republicans.

"These are huge numbers," said Treasury Secretary Mnuchin. "You could have as high as $2 trillion difference in revenues over a 10 year period depending on what you think is going to be the growth function. The plan will pay for itself with growth."

Trump economic advisor Cohn was slightly more cautious, saying that "running a big deficit in the tax code would potentially make it not permanent." But, like Mnuchin, he emphasized the importance of dynamic scoring (i.e., aggressive growth assumptions based on Trump's economic policies).

Not all Republicans are warming to what some describe dismissively as a "magical" supply-sider approach. After Mnuchin's speech, a Republican intimately involved in tax reform emailed Axios: "Believing in $2 trillion in dynamic scoring is the legislative equivalent of believing in the tooth fairy. Aside from blowing a hole through the deficit, it does not provide the certainty that U.S. businesses need to make long-term investment decisions. That is one of the stated goals for tax reform."

Go deeper

HBCUs are missing from the discussion on venture capital's diversity

Illustration: Eniola Odetunde/Axios

Venture capital is beginning a belated conversation about its dearth of black investors and support of black founders, but hasn't yet turned its attention to the trivial participation of historically black colleges and universities (HBCUs) as limited partners in funds.

Why it matters: This increases educational and economic inequality, as the vast majority of VC profits go to limited partners.

Unemployment rate falls to 13.3% in May

Data: Bureau of Labor Statistics; Chart: Axios Visuals

The U.S. unemployment rate fell to 13.3% in May, with 2.5 million jobs gained, the government said on Friday.

Why it matters: The far better-than-expected numbers show a surprising improvement in the job market, which has been devastated by the coronavirus pandemic.

The difficulty of calculating the real unemployment rate

Data: U.S. Department of Labor; Note: Initial traditional state claims from the weeks of May 23 and 30, continuing traditional claims from May 23. Initial PUA claims from May 16, 23, and 30, continuing PUA and other programs from May 16; Chart: Andrew Witherspoon/Axios

The shocking May jobs report — with a decline in the unemployment rate to 13.3% and more than 2 million jobs added — destroyed expectations of a much worse economic picture.

Why it matters: Traditional economic reports have failed to keep up with the devastation of the coronavirus pandemic and have made it nearly impossible for researchers to determine the state of the U.S. labor market or the economy.