Kevin Hassett

Based on Wikipedia: Kevin Hassett

The Man Who Predicted Dow 36,000

In 1999, Kevin Hassett co-authored a book with one of the most spectacularly wrong titles in financial history: Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market. The timing could not have been worse. Within months, the dot-com bubble burst, and the stock market crashed. The Dow Jones Industrial Average, which the book predicted would soon quadruple, instead plummeted.

Yet here's the remarkable thing: that prediction did not end Kevin Hassett's career. Far from it.

Over the following decades, Hassett would advise four different Republican presidential campaigns, serve as chairman of the Council of Economic Advisers under Donald Trump, build a coronavirus death model that public health experts widely criticized, and ultimately rise to become the director of the National Economic Council—one of the most powerful economic positions in the American government.

His trajectory tells us something important about how Washington actually works, where being confidently wrong about the future matters far less than being connected to the right people and institutions.

The Making of a Washington Economist

Hassett grew up in Greenfield, Massachusetts, a small town in the western part of the state. He was academically gifted, graduating summa cum laude from Swarthmore College with a degree in economics in 1984. At Swarthmore, he was also captain of the varsity track team—a detail that hints at the competitive drive that would characterize his career.

He went on to earn a doctorate in economics from the University of Pennsylvania, focusing on applied econometrics. That's the branch of economics that uses statistical methods to test economic theories against real-world data. His dissertation adviser was Alan Auerbach, a prominent tax economist with whom Hassett would later collaborate extensively.

After completing his PhD, Hassett followed the traditional academic path. He taught at Columbia Business School as an assistant professor, then associate professor. But he was also building connections in Washington. From 1992 to 1997, he held a position as a senior economist at the Federal Reserve Board of Governors—the institution that sets interest rates and regulates banks in the United States. He also consulted for the Treasury Department under both the first George Bush and Bill Clinton.

This dual career—academic credentials combined with policy experience—is the standard recipe for influence in Washington. Hassett was learning both languages: the technical vocabulary of economic research and the political vocabulary of policy debates.

The Think Tank Years

In 1997, Hassett made a pivotal career move. He left academia to join the American Enterprise Institute, commonly known as AEI.

Think tanks occupy a peculiar space in American intellectual life. They're not quite academic institutions, though they employ scholars and publish research. They're not quite lobbying organizations, though they advocate for particular policy positions. They're not quite media outlets, though their experts appear constantly on television and write for major newspapers.

What think tanks do, primarily, is provide intellectual ammunition for political battles. AEI is one of the most influential conservative think tanks in the country. It has promoted free-market economics, skepticism of government regulation, and lower taxes for decades. By joining AEI, Hassett was signaling which side of American politics he would serve.

At AEI, Hassett worked on the issues that define Republican economic orthodoxy: tax policy, fiscal policy, and energy issues. He collaborated frequently with Glenn Hubbard, another prominent conservative economist who would go on to chair the Council of Economic Advisers under George W. Bush. Together, they wrote papers on income inequality, tax reform, and how to handle budget surpluses—a concern that seems almost quaint now, in an era of trillion-dollar deficits.

By 2003, Hassett had risen to direct AEI's economic policy studies program. He became a regular columnist for Bloomberg and National Review, and his opinion pieces appeared in the New York Times, the Washington Post, and the Wall Street Journal.

This is how intellectual influence works in Washington. You build credentials at respected institutions. You publish prolifically. You become the person journalists call when they need an economist to comment on the news. You become recognizable. And when a presidential campaign needs an economic adviser, your name comes up.

The Campaign Trail

Hassett's first major campaign role came in 2000, when he served as John McCain's chief economic adviser during the Republican primaries. McCain lost that race to George W. Bush, but Hassett had established himself as a go-to economist for Republican candidates.

He advised George W. Bush's 2004 reelection campaign, returned to advise McCain again in 2008, and worked on Mitt Romney's 2012 campaign. Four presidential campaigns across more than a decade. Even when the candidates lost, Hassett's reputation grew.

Campaign economics is a peculiar discipline. The goal is not to produce rigorous academic research. The goal is to generate talking points, to craft economic narratives that voters will find compelling, and to attack the opponent's economic proposals. It requires a different skill set than academic economics—more persuasion, less precision.

Hassett proved adept at this kind of work.

The Dow 36,000 Problem

Let's return to that notorious book.

Dow 36,000, co-authored with journalist James Glassman, argued that stocks were dramatically undervalued. The authors calculated that if investors stopped demanding an "equity premium"—the extra return they expect from risky stocks compared to safe bonds—stock prices would be approximately four times higher than they actually were at the time.

This was an audacious claim. The equity premium exists because stocks are genuinely riskier than bonds. Companies can go bankrupt. Recessions can hammer profits. Wars and pandemics can upend entire industries. Investors demand higher expected returns from stocks precisely because they might lose their money.

The book essentially argued that investors were being irrational—that they were demanding too much compensation for risk. It predicted that as investors became more sophisticated, they would bid stock prices up to their "correct" value.

Instead, the opposite happened. The dot-com bubble burst spectacularly. The NASDAQ fell nearly 80 percent from its peak. Many of the high-flying technology stocks that had seemed to justify optimism about the "new economy" went to zero.

In academia, being this wrong would seriously damage your reputation. In Washington, it barely mattered.

The Laffer Curve Controversy

Hassett generated another controversy in 2007 when he argued that the United States was on the wrong side of the Laffer curve for corporate tax rates.

The Laffer curve is a concept named after economist Arthur Laffer, who reportedly sketched it on a napkin during a dinner in 1974. The idea is simple: if tax rates are zero, the government collects no revenue. If tax rates are 100 percent, no one bothers to work or invest, so the government also collects no revenue. Somewhere between these extremes, there's a rate that maximizes revenue.

The politically explosive implication is that if tax rates are "too high"—above the revenue-maximizing point—cutting taxes could actually increase government revenue. This idea became central to supply-side economics and Republican tax policy for decades.

Hassett argued that America's corporate tax rate was above this optimal point. He created a graph to illustrate his argument. Some commentators characterized that graph as deceptive—suggesting that it exaggerated the relationship between corporate tax rates and revenue in ways that supported his predetermined conclusion.

The episode illustrated something important about Hassett's role in economic debates. He wasn't a neutral analyst seeking truth. He was an advocate using economic arguments to support policy positions he already favored.

Chairman of the Council of Economic Advisers

When Donald Trump won the presidency in 2016, he needed economists willing to work in his administration. This was not as easy as it might sound. Trump's economic views—his enthusiasm for tariffs, his attacks on free trade, his unpredictability—made many traditional Republican economists uncomfortable.

Hassett was willing to sign on.

His nomination as chairman of the Council of Economic Advisers, known as the CEA, met opposition from an unexpected quarter: anti-immigration groups. Breitbart News, American Renaissance, and the Center for Immigration Studies all criticized the pick. Why? Because Hassett, like most economists, believed that immigration generally spurs economic growth. This put him at odds with the restrictionist wing of Trump's coalition.

The Council of Economic Advisers is a three-member body within the Executive Office of the President. It was created in 1946 to provide the president with objective economic analysis and advice. In practice, CEA chairmen often serve as advocates for the administration's economic policies rather than purely objective analysts.

Trump had already diminished the role somewhat by removing the CEA chairman from cabinet-level status—breaking with recent tradition.

Hassett served from September 2017 to June 2019. His most significant contribution was helping design and sell the Tax Cuts and Jobs Act of 2017, known as the TCJA—a massive tax overhaul that slashed the corporate tax rate from 35 percent to 21 percent.

The Ireland Tax Haven Episode

While advocating for the TCJA, Hassett had repeatedly labeled Ireland a tax haven—a jurisdiction where multinational corporations could shelter profits to avoid paying taxes in countries where they actually did business.

He wasn't wrong, exactly. American tech giants and pharmaceutical companies had for years used complex corporate structures involving Ireland to minimize their tax bills. Arrangements with colorful names like the "Double Irish" allowed companies to route profits through Irish subsidiaries and pay very little tax anywhere.

But Hassett's comments created a diplomatic awkwardness. Ireland is a close American ally and a member of the European Union. Irish officials were not pleased to have a senior American official calling their country a tax haven.

During an official visit to Ireland in September 2018, a reporter asked Hassett whether the United States considered Ireland a tax haven. His response was memorable: "It's not Ireland's fault US tax law was written by someone on acid."

This was a striking admission. Hassett was essentially conceding that American tax law had created the incentives for companies to shift profits abroad. The problem was not that Ireland offered low tax rates—any country can set its corporate tax rate wherever it wants. The problem was that American law allowed companies to take advantage of those rates while still enjoying the benefits of the American market.

Yet the TCJA, which Hassett had championed, did not entirely solve this problem. In February 2019, Brad Setser of the Council on Foreign Relations wrote a New York Times article arguing that the TCJA actually created new incentives for American companies to use tax havens—the opposite of what had been promised.

The Coronavirus Model

In March 2020, Hassett returned to the White House. The coronavirus pandemic had arrived, and the Trump administration was scrambling to respond. The economy was in freefall. Lockdowns had shuttered businesses across the country. Unemployment claims were exploding.

Hassett had no background in infectious disease modeling. He was an economist, not an epidemiologist. Yet he built a model predicting how the pandemic would unfold.

His model predicted that coronavirus deaths would peak in mid-April 2020 and then drop to near zero by May 15.

This was wildly optimistic. Public health experts who actually studied infectious diseases were projecting much higher death tolls over a much longer period. The virus, they warned, would not simply disappear in mid-May.

When Hassett's model was released publicly, academics and commentators criticized it harshly. An economist with no training in epidemiology had produced a model that contradicted the consensus of actual experts—and that model happened to support the administration's desire to reopen the economy as quickly as possible.

The model proved spectacularly wrong. Deaths did not fall to near zero in May. In fact, the United States would eventually record over one million coronavirus deaths. The pandemic continued for years, not weeks.

Hassett also produced economic projections, predicting that gross domestic product could fall by 40 percent and unemployment could reach tens of millions. These grim forecasts were more accurate—the economic damage was indeed severe.

In early May 2020, Hassett suggested there might not be a need for more coronavirus economic relief, because he believed economies in nearly all states could reopen by the end of the month. This too proved overly optimistic. Congress would pass several more relief packages over the following year, totaling trillions of dollars.

Return to Power

After Trump lost the 2020 election, Hassett's profile receded. But he remained connected to Trump's orbit. When Trump announced he was running again in 2024, Hassett was reportedly on the shortlist for chairman of the Federal Reserve—the most powerful economic position in the country, perhaps in the world.

Trump won the 2024 election. He named Hassett as director of the National Economic Council.

The National Economic Council, known as the NEC, was created by Bill Clinton in 1993. Its director coordinates economic policy across the executive branch, serving as the president's top economic adviser. The role is arguably more influential than the CEA chairman position Hassett had held before—it involves not just analysis but actual coordination of policy across multiple agencies.

Hassett took office in January 2025. In this role, he has defended Trump's aggressive use of tariff threats against other countries—a significant shift from his earlier free-market positioning at AEI, where skepticism of trade barriers was orthodoxy.

By October 2025, Hassett was again being discussed as a potential Federal Reserve chairman. Treasury Secretary Scott Bessent confirmed that Hassett was on the shortlist of five candidates being considered to replace Jerome Powell when Powell's term ends in May 2026.

What Does Kevin Hassett's Career Tell Us?

The economist's path from Greenfield, Massachusetts to the pinnacle of American economic policymaking illustrates several truths about how power works in Washington.

First, being wrong is survivable—even being spectacularly wrong. The Dow 36,000 prediction and the coronavirus death model were both embarrassingly incorrect. Neither prevented Hassett from advancing.

Second, institutional affiliation matters more than individual accuracy. Hassett built his career at respected institutions: Swarthmore, Penn, Columbia, the Federal Reserve, AEI. These credentials provided credibility that outlasted any particular failed prediction.

Third, loyalty is rewarded. Hassett advised four Republican presidential campaigns. He was willing to serve in the Trump administration when many traditional economists were not. He defended the administration's positions even when they contradicted his earlier views. This loyalty earned him increasing responsibility.

Fourth, economic policy is as much about politics as economics. The technical question of what policies would maximize growth or welfare often takes a back seat to the political question of what policies serve particular interests and coalitions. Hassett understood this and operated accordingly.

Whether this is a good thing for America is a separate question. The story of Kevin Hassett is not a morality tale. It is simply a description of how the system works—how economists rise to power, what skills they need, and what mistakes they can survive.

The Dow Jones Industrial Average, incidentally, did eventually reach 36,000—in November 2021, more than two decades after Hassett predicted it would happen imminently. By then, the original prediction had been so thoroughly forgotten that hardly anyone noticed.