For the last decade, U.S. GDP has grown about 2 percent per year; a full percentage point off our 3 percent post-WWII-average. For the next decade, the Congressional Budget Office (CBO) projects growth of just 1.8 percent.
Here is the challenge and opportunity. If economic growth is restored to 3 percent for the next decade, the U.S. will have 12 million more jobs and an economy that is $6 trillion larger than it is today and $2 trillion larger than the economy would be if the current CBO growth estimate holds.
Any U.S. policymaker interested in meeting this challenge must consider tax reform and infrastructure investment.
America’s crumbling roads, bridges and tunnels and our complex and uncompetitive tax code are both huge barriers to investment and to hiring. Knocking these barriers down would provide a substantive boost to the economy.
Why tackle both of these challenges together? Because an infrastructure-tax deal has all the ingredients of the classic political grand bargain. It’s both good politics and good policy.
Republicans badly want tax reform. Democrats want infrastructure.
Meanwhile, U.S. companies currently have over $2 trillion in untaxed corporate profits parked overseas. Tax reform could bring some of these funds back to the U.S., with the added tax revenue being used to fund infrastructure investment.
The New Center isn’t the first to suggest this combination. In 2015, Rep. Paul Ryan (R-WI) and Sen. Chuck Schumer (D-NY)—now the U.S. Speaker of the House and Senate Minority Leader—were discussing a comprehensive tax-infrastructure deal. President Donald Trump has suggested he’d be open to a similar deal.