Gary Cohn: U.S. economy is "really strong" but "we've got a huge debt problem"
This week marks one year since the passage of the Tax Cuts & Jobs Act, which reduced tax rates for individuals, increased the standard deduction and cut the corporate tax rate from 35 percent to 21 percent. Since the tax cuts took effect this year, they've been credited with boosting the economy but also criticized for not helping working families.
Gary Cohn, who served as director of the National Economic Council and as chief economic adviser to President Trump during the tax debate, told "CBS This Morning" on Tuesday that despite a strong U.S. economy, "we've got a huge debt problem."
"I'm not going to sit here and deny that we've got a debt problem. I think we've got a huge debt problem and I'll be the first to tell you that. But our debt problem is not a revenue problem, as you just said. Our revenue is up this year, even with the new tax legislation. We have a spending problem in this country," Cohn said.
The federal budget deficit surged to $779 billion in fiscal year 2018, its highest level in six years. The deficit worsened because tax revenues are not keeping pace with government spending after Mr. Trump's tax cuts took effect.
Proponents of the bill argued that corporations would use the tax rate cut to increase wages and reinvest in the economy. So far though, we have yet to see a corporate impact on the overall GDP. Cohn said the reason we haven't seen results from larger companies yet is because they require more time to plot out that reinvestment.
"If you actually look at the numbers, we're seeing exactly what we would have thought we would have seen in capital expenditures. Small and medium-size businesses are spending. Because if you think of a small or medium-size business today, the regulatory process that they need to go through to spend is not that difficult," Cohn said.
"If you're going out to build a huge manufacturing facility in the United States that's going to hire 15,000, 20,000, 30,000 people, you need to go out and do a massive plan for that," he said. "You need to go out and acquire the land, you need to get the permits, you need to hire the architects. You need to go through that entire process. It takes well over a year."
Though much of the corporate reinvestment has gone to stock buybacks and dividends, Cohn pointed to increased wages for lower-paid workers as an example of the tax bill doing exactly what it was intended to do.
"The more interesting part about the wage growth is that we've got the bottom end of workers, the lower paid workers growing at a faster rate than the higher paid workers. And we think that's directly attributable to the tax bill," he said.
"We gave companies a five-year window to expense all of their capital expenditures. We've seen in recent weeks, we've seen companies like Apple and Amazon announce mega billion-dollar plants, where they're really going to go out and build new plants, hire me to people. That is going to start hitting the economy in the beginning of next year," he said.
As Mr. Trump and Congress face a partial government shutdown over the $5 billion the president is seeking for his proposed southern border wall, Cohn warned a shutdown is never good for the economy.
"We never want to see the government shut down. Shutting the government down, shutting a business down is never a good move. I'm hopeful that the Congress can get together in the next couple of days here and deliver something to the president that makes sense that he's willing to sign," he said.
Though Cohn left his post at the White House in March, he has no regrets about his time there.
"It was the most amazing experience of my life. Anyone who gets the opportunity to serve this country, they should take that opportunity. It was a spectacular experience," he said.