U.S. tax reform unlikely to generate more economic growth: study

Source: Xinhua| 2017-11-29 04:28:09|Editor: Mu Xuequan
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WASHINGTON, Nov. 28 (Xinhua) -- The Republican tax reform bill under consideration is unlikely to generate more than 0.1 percent points of increased growth per year, and over the long run it may actually slow the U.S. economic growth, showed a study of a bipartisan, independent public policy organization.

The study published by the Committee for a Responsible Federal Budget (CRFB) on Monday weighted in recent tax debates by disputing the claim of some economists that cutting taxes would galvanize economy.

In a recent letter to Treasury Secretary Steven Mnuchin, nine renowned conservative economists, including Harvard professor Robert Barro and Stanford professor John Taylor, said the reform would lift the annual rate of GDP growth by 0.4 percent over time.

Most of the economists have worked as economic advisers for Republican presidents.

"Claims that tax reform will generate 0.4 percentage points more of growth generally come from cherry-picking data," said the CRFB. "No previous tax plan would boost growth by 0.4 points per year."

Moreover, the CRFB said most rosy growth estimates ignored the cost of debts.

"When the government issues new debt, it must be purchased from increased foreign investment, higher domestic savings, or a shift in domestic savings away from private investments. This shift is known as 'crowd out,' and over time it leads to lower private investment and therefore slower economic growth," said the report.

According to the Congressional Budget Office (CBO), a federal agency within U.S. Congress, a 1 U.S. dollar increase in deficits leads to 0.33 dollar in private investment being crowded out. And the current Republican tax reform bill could add more than 1.4 trillion to national debts.

The U.S. Senate could vote for the tax reform bill as early as Nov. 30. U.S. president Donald Trump said he wanted to sign the bill before Christmas.