Top White House Economic Advisor Larry Kudlow said while the administration needs to be tougher on spending, growth from recent tax cuts should fix the issue.
“If you grow rapidly you’re going to have lesser deficits. Growth solves a lot of problems,” Kudlow said at the Economic Club of New York on Monday. “The gap is principally spending too much.”
Thanks to an uptick in gross domestic product, or GDP, after tax cuts, Kudlow said the U.S. has “just about paid for two thirds of the total tax cuts.”
The tax overhaul passed in December permanently cut the corporate tax rate to 21 percent and temporarily reduced taxes on most individuals. The plan sparked concerns in both political parties about growing budget deficits.
“People are quick to blame deficits on tax cuts but I don’t buy that,” he said. “Tax cuts promote growth and wages.”
GDP growth in the second quarter of this year increased at a 4.2 percent annualized rate, according to the Commerce Department’s estimate of GDP growth for the April-June quarter.
Still, Kudlow said he would still prefer if U.S. deficits were lower than the current 4 percent to 5 percent of GDP for the next two years but “it’s not a catastrophe.” He called it one of the “rare moments” he publicly agrees with Congressional Budget Office.
“We spent too much, I absolutely agree,” Kudlow said. “Down the road of course we’d like to slim that down as much as possible.”
Part of the Republican plan to curb spending is tackling entitlements. Kudlow said the administration was “still chipping away” to reduce the “burdens and inefficiencies of entitlements,” including certain pillars of the Affordable Care Act.
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