The Trump Administration has repeatedly emphasized that tax cuts, outlined in its framework on tax reform published in September, will pay for themselves through stimulated growth. But with interest rates currently at historic lows, corporate profitability at record highs, and an economy operating at full employment, many economists question the ability to boost GDP growth from 2% to 3%, the estimated number it would need to hit to offset costs.

Gary Cohn, Director of the National Economic Council (NEC), told Yahoo Finance the additional growth will come from bringing overseas profits back to the US.

“Corporate profits are high, but where are those profits? Those profits are not in the United States. Those profits are overseas, they’re offshore,” Cohn said. “That’s why when we talk about repatriation, we talk about bringing back all this money. The reason we haven’t been able to raise wages in the United States is because corporate profits are offshore.”

Cohn added when it comes to the next leg of growth, it’s all about the location of funds.

“It’s not about corporate earnings; it’s about where the corporate earnings are,” he said. “It’s not about jobs; it’s where the jobs are.”

However, economists have questioned what the shift of profits and cash to the US will really do to spur investment and hiring.

“Those overseas accounts are just an accounting device, which have very little real effect,” Paul Krugman wrote. “Many of the companies with big overseas hoards also have plenty of idle cash at home; what’s holding them back is a lack of perceived opportunities, not cash flow. And even those who don’t have surplus cash can easily borrow at near-record low interest rates; remember, they can always use the overseas cash to secure their loans.”

Plus, during the last repatriation event in 2004, the cash brought to the US did not lead to domestic investment or hiring but instead benefited shareholders.

The administration has doubled down, saying corporate tax cuts will directly impact workers. In fact, Kevin Hassett said this week that reducing the corporate tax rate would give workers a $4,000 raise. But the economic analysis on this subject disagrees—including the 2012 Office of Tax Analysis paper, which was taken off the Treasury website—showing instead that workers pay about 20% of corporate tax and shareholders about 80%.

Cohn, though, said wages aren’t growing in the US because jobs, revenues and earnings are being created offshore.

“The problem with our system today is we have a worldwide tax system. So if you earn money in a foreign country, you pay the taxes in the foreign country,” Cohn said. “If you want to bring it back to pay your workers here, you pay taxes second time… So when we go to a territorial system, you’re going to pay tax once, or you’re gonna build your business where you have a low tax rate, which is going to be in the United States, and then you’re gonna hire workers in the United States.”

There’s no doubt there has been bipartisan support for corporate tax reform, including proposals from President Obama to reduce corporate tax rates. After all, the US statutory corporate tax rate is the highest among OECD countries (though the average effective tax rate is lower). But the claim that cuts will pay for themselves and also benefit workers in an outsized manner continues to be questioned.

For more from Yahoo Finance’s interview with Gary Cohn, please see:
Gary Cohn: We won’t put conditions on repatriated cash, and we’re fine with stock buybacks
Gary Cohn: ‘The estate tax is really about small business’
Gary Cohn: ‘We have to have a permanent change in the tax system’

—
Nicole Sinclair is a markets correspondent at Yahoo Finance

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