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Tax Cuts Plus Increased Spending While Economy Is Growing Akin To Throwing 'lighter Fluid On A Fire': Blankfein

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The federal government's plan to increase spending in an already expanding economy while cutting $1.5 trillion in taxes isn't something Goldman Sachs CEO Lloyd Blankfein would have attempted.

"It wouldn't have been what I would do. I think it's a very bold thing to kind of throw a little bit more lighter fluid on a fire that was already going," Blankfein said during an interview Tuesday afternoon on Bloomberg television.

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The concern is that the economy could get overheated, forcing the Federal Reserve, which is already raising rates, to act more quickly. That, in turn, could stall out the economy.

The tax cuts, enacted late last year, were pushed through with the assistance of some Goldman alumni, including Gary Cohn, the bank's former president who is now President Donald Trump's top economic advisor, and Steven Mnuchin, a former Goldman partner who is now Treasury Secretary.

The Trump administration is looking for the economy to expand even more than it has been, and if that is the case people will earn more money and pay more taxes, making the case for supply-side economics, Blankfein said.

Already, business conditions are improving, and the government can always reverse course if it needs to. "I think it's a risky thing. I probably wouldn't have done it," Blankfein said. "Do I think [it's] crazy? No. Wrong? We'll see."


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Source : https://www.cnbc.com/2018/02/13/tax-cuts-like-throwing-lighter-fluid-on-a-fire-blankfein.html

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