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February 16, 2018 at 11:23 AM
MF Managing Director Christine Lagarde said the Trump administration’s $1.5 trillion tax cut could prompt other nations to follow suit, fueling a “race to the bottom” that risks hemming in public spending.
While the impact of the package passed by Congress in December is only just beginning to be understood, its effects are likely to include increased consumption and “hopefully the payment of higher wages,” Lagarde said on a panel at the Munich Security Conference in Germany on Friday. It also will fuel inflation, she said.
(Related: The Tax Cuts and Jobs Act: An Advisor’s Guide)
“What we are beginning to see already and what is of concern is the beginning of a race to the bottom, where many other policy makers around the world are saying: ‘Well, if you’re going to cut tax and you’re going to have sweet deals with your corporates, I’m going to do the same thing,”’ Lagarde said.
