Kevin Hassett, the chairman of the White House Council of Economic Advisers, said Tuesday that stock markets could face a pullback if the Republican tax-cut proposals aren't passed into law.
"The market might already be ahead of itself if the tax reform doesn't pass," said Mr. Hassett, who said he believes markets haven't fully priced in the potential boost to the economy from any tax cut.
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Senate Republicans' proposal to overhaul the tax code, unveiled last week, diverges in key ways from a plan that advanced through a House committee. Both bills would reduce the corporate tax rate to 20% from 35%, but the Senate proposal would delay the rate cut until 2019, forgo a repeal of the estate tax and eliminate the entire state and local tax deduction.
Mr. Hassett, speaking at The Wall Street Journal's CEO Council gathering, also dismissed concerns raised by some economists that the economy would face risks overheating if Congress approves new stimulus at a moment when the unemployment rate has fallen to a 17-year low of 4.1%.
Instead, Mr. Hassett said the economy is nearing a "magic moment" when employers have to raise wages and boost investment to compete for workers, and that overhauling the tax code at that time "could really be transformative for our economy," he said.
While Mr. Hassett said he saw little evidence that the economy faces the near-term risk of a recession, he said an overhaul of the tax code could also provide "an insurance policy" against a downturn. The current U.S. economic expansion is the third longest on record.
Mr. Hassett said the administration was prepared to advance an infrastructure spending proposal after Congress finishes its work on taxes but offered few details about what that package might include. "It's still a work in progress," he said.
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(END) Dow Jones Newswires
November 14, 2017 16:26 ET (21:26 GMT)