



President Donald Trump’s top economist has an unusual idea for dealing with the problem of long-term unemployment: Just have the government hire people.

That’s a New Deal-style idea more closely associated with highly progressive Democrats. But Kevin Hassett, the conservative chairman of the White House Council of Economic Advisers, believes some Americans are so disconnected from the workforce that the best idea to get them working again could be a federal jobs program that would ultimately lead to private-sector employment.


“We’ve not done a good job as a society at thinking about how do we take people who have become discouraged and reconnect them,” Hassett said in the latest edition of the “POLITICO Money” podcast. “And it’s such an urgent problem that government programs that directly hire people might be part of the solution.”

This and other unusual ideas could emerge next year when the White House hopes to pivot from its current tax cut push to an infrastructure bill aimed both at rebuilding crumbling roads, bridges, ports and other national assets and at addressing the shrunken size of the labor force.

To Hassett, long-term unemployment often leads to family breakdown and descent into addiction and other maladies. “People who have been unemployed for more than a year very often don’t ever reconnect to the labor force,” he said. “And very often they fall into sort of downward spirals of personal despair where they end up abusing substances and have a higher risk of divorce. Some of the literature in this area is just absolutely disturbing.”



But before he can turn to that, Hassett remains convinced that the tax cut bill now emerging on Capitol Hill that would slice the top corporate rate from 35 percent to 20 percent will in fact add at least $4,000 in increased wages per household over the next several years, a claim many progressive economists do not believe is supported by data.

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Hassett called the idea “iron-clad” based on studies of other countries cutting their corporate rate. And he said he believes the increase could be even greater.

He argues that a lower corporate rate and more immediate expensing of capital investments will lead to greater productivity among workers and thus higher wages without big inflationary pressure.

“If you have a supply-side stimulus precisely now, we can get capital deepening back to where it used to be, then you could add a percent to GDP growth,” he said. “And that will increase labor productivity and increase wages but not in a way that’s inflationary.”

Hassett, speaking before the release of the latest tax bill, also criticized a proposal floated by Republicans on Capitol Hill that would limit the amount that workers could contribute with pre-tax dollars to their 401(k) retirement plans. Trump has also sharply criticized the idea, putting the White House at odds with some congressional Republicans leading the tax cut push.

“I await the details on the 401(k), but I agree that 401(k)s are a very, very important part of society that help people save for retirement. And the president has said that he’s very supportive of the current design of 401(k)s, and I agree with him.”

And he defended the administration’s argument, pressed by Treasury Secretary Steven Mnuchin, that the tax cuts could pay for themselves and possibly even reduce the national debt.

“If you think of the scale of the tax reduction, we are talking about $1.5 trillion and then divide it by 10 years you are talking about $150 billion per year in an economy that is $20 trillion by the end,” he said. “So you don’t really need to have a big growth effect to have Secretary Mnuchin be correct.”

Hassett, an affable economist with friends on both side of the partisan aisle, also spoke about his often-lampooned 1999 book with James Glassman, “Dow 36,000,” that predicted stocks would hit that mark by 2004. Instead, the dot-com bubble burst and stocks tanked.

Hassett described the title of the book as a bit of a “youthful indiscretion” that was also somewhat unfairly maligned. “The point was that people who buy and hold stocks for the long run tend to do well, but that stocks go up and down a lot and it’s scary.”

