Cowen clears away the muddled, ill-formed thinking from Trump's critics:
This argument for a corporate tax cut -- “let’s borrow more now while rates are relatively low” -- is remarkably like the argument that Keynesians have been using for more government infrastructure spending for years. The main difference is that here the spending would be done by private corporations rather than the federal government. You may or may not believe the private expenditures will be more socially valuable than the government expenditures, but if you think we can afford one kind of stimulus we probably can afford the other. And as I said, the private rate of return on investment probably is higher than the government’s borrowing rate, even if you think that government spending would yield higher returns yet.
To put it bluntly, I am suspicious of ideological motives when anyone says we can afford a big dose of government stimulus but we cannot afford a corresponding private stimulus. The more consistent view is that we probably need more investment on both fronts, and thus cuts in the corporate tax rate are a welcome start, at least if we put aside the pessimistic scenario mentioned above. It’s still legitimate to consider whether a plan should include more government stimulus (Trump himself would probably agree, though Congress may not), but that’s a very different point from claiming the U.S. cannot afford a corporate tax cut. In addition, you also might think that some other taxes should go up, such as consumption taxes, but even if true it does not mean the corporate rate cut is unaffordable.Read the whole column at Bloomberg.
