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Financial Planning > Tax Planning > Tax Reform

Lagarde Says Trump’s Slow Pace on Tax Reform Hurts Growth

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U.S. delays in implementing tax reforms and boosting infrastructure spending could frustrate the Trump administration’s efforts to almost double economic growth, International Monetary Fund Managing Director Christine Lagarde said.

“We think it’s going to be very difficult” for the administration to reach its 3-4 percent economic growth target, Lagarde said in an interview on CBS that aired Wednesday. “Particularly if the reform pace is as slow as it is. And that contrasts with the rest of the world, because the rest of the world is doing pretty well.”

The Trump administration has been scrambling to make progress on pledges to cut taxes and boost infrastructure spending. The administration is working with lawmakers to build support for its plan to reduce taxes for the middle class and corporations by the end of the year.

The IMF in June lowered its forecast for U.S. economic growth to 2.1 percent this year and 2018, removing its assumptions for higher spending and tax reductions.

The IMF sees U.S. expansion of “around 2.1” percent and it “might be a little higher than that,” Lagarde said. “There were very strong market expectations early in the calendar year, after the elections, that the tax reform would take place promptly, that massive investment would be made in infrastructure, and that there would be a push. It hasn’t happened, it hasn’t materialized at all.”

North Korea

Lagarde called fresh United Nations sanctions imposed on North Korea this month after its most powerful nuclear test as a step in the “right direction.” While economic sanctions have proven effective, the difficulty is how to implement and enforce the measures, she said.

Lagarde urged for calm on dealing with North Korea’s missile and nuclear weapons ambitions. President Donald Trump on Tuesday during a speech to the United Nations General Assembly escalated tensions by calling North Korea leader Kim Jong-Un “rocket man” and threatening to “totally destroy” the country if the U.S. is forced to defend itself.

“What I heard yesterday about North Korea in particular had a lot to do with politics and rhetoric,” Lagarde said. “Those issues are so difficult, complicated, that they require a lot of goodwill, a lot of calm, and a lot of cooperation. And that’s why I think that rhetoric does not necessarily help.”

— Check out Republicans Need a Tax Plan for 2017, Not 1981 on ThinkAdvisor.


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