Kevin Hassett, the man who would be one of President Donald Trump's top economic advisers, defended the administration's forecasts for robust economic growth over the next decade, saying a target of 3% growth is achievable with the right policies.
"I think it's absolutely possible to return to a place where you get 3% growth if you design policies that encourage capital formation in the United States," said Mr. Hassett, the nominee to be chairman of the Council of Economic Advisers, in testimony before the Senate Banking Committee. "For sure, if we don't change policy, we can expect to stay around 2%."
The president's budget forecasts the U.S. economy would grow 3% a year for most of the next decade, while private forecasters, the Federal Reserve and Congressional Budget Office have all forecast growth closer to 2%. While there are often differences between the forecasts, they are seldom this large.
Mr. Hassett, the director of research for domestic policy at the conservative American Enterprise Institute, said a tax policy overhaul would be necessary to get such a large lift in growth. He said the discrepancy between private forecasters and the White House may boil down to the fact that the private forecasters "don't envision the kind of sweeping tax changes" that could be enacted.
Mr. Hassett's remarks offer a window into the priorities he would hold as an adviser to a president who removed the Council of Economic Advisers from his cabinet and who, especially as a candidate, had expressed skepticism about economic data.
"I believe it is essential to gather evidence, and not just rely on theories," Mr. Hassett said in his brief prepared remarks. "The real world has many complications that are not included in models, and the data often surprise economists, especially those who have too much confidence in pure theory."
He also said that among his top priorities would be making economic analysis that is "transparent and replicable."
Mr. Hassett would join an administration with some sharp internal divisions in its approach to economic policy, particularly between economic nationalists on one side and Wall Street moderates and establishment Republicans on the other. He would more likely be in the latter camp. He has written work supportive of free trade and increased immigration, and worked as a consultant to Citigroup.
Asked about his past work on immigration, Mr. Hassett said he stands by the analysis that "if there were more workers, you would have more output" and said that "immigrants in this country have been an important source of growth."
He prefaced his remarks, however, by saying that immigration is an issue with "a lot of policy angles" that are not simply economic. He specifically mentioned border security as an additional consideration.
Asked about his biggest worries about the economy, Mr. Hassett cited the length of the current economic expansion, and concerns that the cycle of growth could be nearing its end.
"I think that we've got a recovery that is very long in the tooth," Mr. Hassett said. "Recoveries very often end of old age and it's something we need to be attentive to and think about policies we could adopt that would extend the recovery."
Mr. Hassett has served as an adviser for the three previous Republican presidential candidates: Mitt Romney, John McCain and George W. Bush.
Despite his close ties to the Republican Party, his nomination has won broad support from both liberal and conservative economists.
On Monday, a group of leading academic economists wrote a letter to the Senate Banking Committee in support of Mr. Hassett's nomination. Signatories to the letter included all four of the people who chaired the Council of Economic Advisers for President Barack Obama.
They wrote in their letter that Mr. Hassett has "a record of serious scholarship on a wide range of topics, including tax policy, business investment and energy" and that he has "consistently made an effort to reach out to a wide range of people from across the ideological spectrum, both to promote economic dialogue and to collaborate on research and public policy proposals."
Write to Josh Zumbrun at Josh.Zumbrun@wsj.com
(END) Dow Jones Newswires
June 06, 2017 13:48 ET (17:48 GMT)