The future of President Trump’s bold economic initiatives will largely hinge on who he chooses for key roles. With a national debt surpassing $36 trillion—and projections suggesting it could reach $59 trillion by 2035—the unresolved inflation issue, looming entitlement challenges, and the necessity to extend the 2017 tax cuts all highlight the need for experienced, level-headed advisers to guide the ship.
Enter Kevin Hassett, appointed to head the White House’s National Economic Council. During Trump’s initial tenure, he served as the chairman of the Council of Economic Advisors and later as a senior adviser, making him a trusted figure in Trump’s circle. Hassett’s strategic mind might just be what’s needed to navigate these economic challenges responsibly.
The saying “Personnel is policy” is more than just words; it’s a principle that has molded past governments. Advisors have historically been instrumental in shaping significant economic policies. Think of Arthur Laffer’s influence during Reagan’s era; his ideas on tax cuts and supply-side economics transformed fiscal policy and spurred growth. Similarly, Ezekiel Emanuel played a pivotal role in crafting the Affordable Care Act under Obama, leaving a lasting impact on the healthcare system.
Hassett might indeed be poised to leave a mark just as profound. Discussions around extending Trump’s 2017 tax cuts are particularly contentious. Simply allowing them to expire isn’t viable, yet fully extending them faces scrutiny due to their cost. Paying for these cuts is a critical issue, especially as corporations are often unfairly blamed for various societal problems, leading some to argue for higher corporate taxes to offset individual cuts.
Hassett’s expertise could be key here. In 2006, he co-authored a groundbreaking study with economist Aparna Mathur, exploring the relationship between corporate taxes and wages in manufacturing sectors. Their analysis of 72 countries over 22 years showed that workers end up bearing the brunt of corporate income taxes through decreased wages.
Subsequent studies have reinforced this finding. For instance, Adam Michel from the Cato Institute notes that workers often shoulder more than half, and perhaps up to three-quarters, of corporate tax costs, indicating that reducing business taxes effectively cuts taxes for everyday working people.
Maintaining robust economic reasoning in policy debates is crucial, particularly when looking at expiring tax benefits that should be extended to stimulate investment, productivity, and growth. Hassett’s recent work with Jon Hartley and Josh Rauh of the Hoover Institution underscores the value of continuing tax measures like full expensing, which lets businesses deduct investments fully from their taxes, driving productivity and workforce prosperity.
Beyond tax issues, Hassett has extensively researched debt reduction strategies. In 2010, alongside Andrew Biggs and Matthew Jensen, he reviewed over 100 instances of countries tackling budget deficits. They found that governments focusing on reduced spending were likelier to succeed in cutting debt compared to those relying more on tax hikes.
The team highlighted that unsuccessful fiscal plans often leaned on 53 percent tax increases compared to 47 percent spending cuts, while successful strategies typically involved 85 percent spending reductions.
Given the U.S.’s ballooning debt, implementing strategic austerity measures is no longer a question of “if” but “when,” making it vital to have someone like Hassett who understands the intricacies of fiscal policy adjustments.
Hassett might influence other areas as well. Although he potentially sees tariffs as a tool for negotiating trade concessions, he recognizes that, at their core, tariffs act as taxes on Americans that don’t pave a sustainable path to wealth. His presence might temper the administration’s tariff enthusiasm.
Moreover, drawing from his expertise, Hassett is aware of immigration’s critical role in propelling economic growth—a stance not prominently championed by Trump’s administration.
While much focus is on Trump’s appointments in sectors like healthcare and defense, Hassett’s role deserves equal attention. It represents a commitment to growth, job creation, and fiscal responsibility, as opposed to merely transient populist tactics.
Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, contributed this article in collaboration with Creators Syndicate.
