Lawrence Summers: The Business Roundtable's outlandish tax cut claims

Lawrence Summers, former U.S. treasury secretary, speaks at the World Economic Forum in Davos, Switzerland, in 2015. (Jason Alden/Bloomberg News)

I think of myself as pro-business. I frequently counseled the Obama administration that “business confidence is the cheapest form of stimulus,” and during my times in government have found meetings with business leaders very helpful in understanding economic policy challenges. So when the Business Roundtable (BRT) does an analysis, I pay close attention.

Last Thursday, I read on the Politico website a JPMorgan ad linking to the BRT site where there was a statement that “a competitive 20 percent corporate tax rate could increase wages sufficient to support 2 million new jobs.” The claim surprised me, because 2 million new jobs, on top of current projected job growth, would likely drive the unemployment rate below 3 percent — a level not seen in a half-century, and would be inconsistent with the claims of BRT Chairman Jamie Dimon that businesses can’t fill all their vacancies.

I wrote to BRT chief executive Josh Bolten asking about the methodology behind the claim, and also to Dimon, who referred me back to Bolten. I have now been contacted by the BRT, which has explained their “methodology.” I had low expectations, but the BRT methodology was even less serious than I expected. It appears that they have gone into the “fake fact” business.

Based on what I was told, the BRT did not look at any data on hiring, employment or job creation. There was no study or even piece of paper describing the basis for their conclusions. In conversation, they asserted that a corporation could create a job for $64,000, which surely understates all-in costs of new hiring given overhead and fringes. Then they asserted, exactly counter to the Trump Council of Economic Advisers, that there would be no increases in workers’ wages, only increased hiring. They were unable to offer any defense of this assumption and proceeded to misquote their own ad.

Does any of this matter? I suppose some would say it doesn’t, because corporate tax reform is an important issue, and if the BRT won’t advocate for it, who will? Perhaps. While I think the Trump administration’s analysis regarding taxes has been disgraceful, there is a case for revenue-neutral, well-designed corporate reform.

I think, though, that when a president has lowered the standard of debate in our country to the point where the country’s leading business organization just makes stuff up, it is a very sad day. I have always tried to resist sloganeering and demagogic rhetoric on public policy issues, and taught my students that honest argument and careful analysis matter. Given how much the current climate has corroded the Business Roundtable, I will have to reconsider.

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