Fantasy is reality to some...

'Are you living in a fantasy world?': 'Today' show host grills Paul Ryan on tax bill

By Eliza Relman

The "Today" show host Savannah Guthrie didn't mince words Wednesday in challenging House Speaker Paul Ryan's argument that the GOP tax bill will spur enough economic growth to make up for an explosion in the deficit.

Guthrie told Ryan that many CEOs have said they don't plan to use money saved from tax cuts to reinvest in their businesses, create jobs, and raise workers' wages, contrary to what the GOP has touted as effects of the bill, expected to be enacted as soon as Wednesday after a final vote in the House.

Instead, she said, they'll "do stock buybacks" and "line the pockets of shareholders."

Guthrie quoted Michael Bloomberg, the billionaire businessman and former New York City mayor who wrote in an op-ed last week that it was "pure fantasy to think that the tax bill will lead to significantly higher wages and growth."

She then asked Ryan, "Are you living in a fantasy world?"

Ryan, who has long advocated deep cuts to taxes and government spending, responded by citing surveys of business owners — the vast majority of whom, he argued, would do "just what we say: reinvest in their workers, reinvest in their factories, pay people more money, higher wages."

"The data is really clear," Ryan said, adding that "it's not a question of if, it's a question of how much" workers will benefit from the bill's cutting the corporate tax rate to 21% from the current 35%.

Guthrie then played a clip of Gary Cohn, the former Goldman Sachs executive who now heads the National Economic Council, at a conference last month with CEOs, who were asked whether they'd increase investments in their businesses as a result of the GOP tax bill.

Just a smattering of the CEOs' hands went up, leaving Cohn to awkwardly ask, "Why aren't the other hands up?"

Guthrie told Ryan on Wednesday: "The fact of the matter is corporations are already sitting on a ton of cash. They have record profits: $2.3 trillion. Why aren't they raising wages and creating jobs now?"

Ryan responded that much of this cash was currently "trapped overseas and cannot come back into our economy to be reinvested because of our tax laws."

"We know that if we fix these tax laws we will get reinvestment back in this economy," he said. "Every study under the sun shows us: You lower the tax rates, make us more competitive, you will see faster economic growth in America."

But in 2004, when a so-called tax holiday most recently occurred, roughly 80% of the cash brought back into the US went to fund stock buybacks. The vast majority — 65% — of respondents to a recent Bank of America Merrill Lynch survey of 302 US companies said that they would pay down debt with the money they would save or repatriate under the tax bill.

Forty-six percent of respondents said at least a portion of the repatriated money would be spent on stock buybacks, which help achieve immediate share appreciation and signal to investors that a company views its stock as undervalued. Just 35% said they would spend the money on capital expenditures, or investments in their businesses.

Guthrie also challenged Ryan, whom she described as "a longtime budget hawk," to defend the nearly $1.5 trillion that independent analyses have found the GOP tax cuts will add to the deficit over the next decade.

But when Guthrie asked whether the economic growth that the GOP says the tax cuts will create would make up for the loss in the government's tax revenue, Ryan said that was impossible to predict.

"Nobody knows the answer to that question because that's in the future," Ryan said. "But what we do know is that this will increase economic growth."

The GOP has asserted that the tax bill will pay for itself, but Democrats and other critics argue that Republicans are grossly overstating both the potential economic boost from the tax cuts and the increases in investment by businesses.