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Economist Mark Zandi On Why Tax Cuts Are Not A 'Game-Changer,' Rising Deficits, And Why He Is Not A 'Fan' Of President Trump’s Economic Policies

Dr. Mark Zandi, chief economist for Moody’s Analytics, a leading provider of economic research, says the Trump tax cuts have not had a large impact on IT spending.

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The Trump Tax Cuts: No Game-Changer For IT Spending

Dr. Mark Zandi, chief economist for Moody’s Analytics, a leading provider of economic research, says the Trump tax cuts have been a "small tailwind" to IT spending but have been far from a "game-changer."

"I think it has helped buoy growth, and stronger growth helps support demand for all things including IT," said Zandi, who was co-founder of Economy.com, which was acquired by Moody's Corp. "I don't think it has been a problem, but maybe a small tailwind to the IT industry broadly. But it is not a game-changer. At least not so far. We haven’t noticed any substantive pickup in IT-related investment."

Zandi said he believes that the Tax Cuts and Jobs Act, which went into effect Jan. 1, cutting the corporate tax rate from 35 percent to 21 percent with a 20 percent deduction for pass-through businesses, was a "mistake" because they are deficit-financed.

The tax cuts are being implemented on the back of a ballooning federal budget deficit, said Zandi. "The budget deficit this year is going to come in at $900 billion—up from $650 billion last year—and it is tracking over $1 trillion for next year," he said.

What is the state of the economy right now?

The economy is strong. Growth is robust. Unemployment is low and falling. Inflation is modest. Stock prices, housing values are near record highs. All the top-line economics statistics look very good—at least for the moment.

Are you surprised by the strength of the economy?

No. It is the result of fiscal stimulus. Deficit-financed tax cuts. Deficit-financed government spending increases. It is temporarily juicing up growth this year and into next. The economy is sticking to script.

 
 
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