Larry Summers, former Secretary of the Treasury in the Clinton Administration, says he has his doubts as to whether tax reform can be passed before the August Congressional recess as Treasury Secretary Steven Mnuchin has suggested. Summers also said that he thought the tax plan put forth by Congressman Paul Ryan would do “substantial damage.” Summers made his comments to Yahoo Finance in an interview in his Harvard University offices.
I first asked Summers if he thought tax reform could be completed before the August break.
“I’d be surprised,” he said. “We don’t really have a consensus on a model for the tax reform yet. The border adjustment idea that has been pushed very hard, has a large number of major problems, economic prognostication is hard enough without doing political prognostication. So, I don’t want to make a confident forecast on tax reform. But it seems to me that it’s a very, very optimistic target that has been set, if you’re talking about August for the completion of tax reform.”
All of this begs the question, just how crucial is tax reform for growth and the U.S. economy?
Summers says it could be.
“I think the right tax reform could be constructive, the right tax reform could encourage corporate investment, the right tax reform could reduce inefficiency,” he says. “The right tax reform that went after tax shelters in the right way could make the tax system fairer, and more legitimate. So, I’m a strong supporter of tax reform.
“I don’t think the vision put forward by Congressman Ryan is a viable vision. I think it would do substantial damage to the global economy, because of the combination of the big appreciation the dollar would likely generate, and the disruption to existing economic arrangements through the penalty for exports that would come. So, I don’t think we’ve yet seen a sound fiscally responsible pro-incentive plan. But I think if one could be developed, there would be significant benefits to the economy.”
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