Assumptions cast doubt on Trump budget
to take us back to the 1990s.”
Mulvaney pitched the $4.1 trillion budget proposal as reflecting the interests of taxpayers who want their money properly spent. Along with Treasury Secretary Steve Mnuchin and Gary Cohn, director of the National Economic Council, the budget director said he had determined the growth rate by estimating the impact of fewer federal regulations, a still vague set of tax cuts and the repeal of the 2010 federal health care law.
Mulvaney stressed that the administration had ruled out the likelihood that the economy will grow only about 2 per cent annually.
“We reject that pessimism,” Mulvaney said at a White House briefing Tuesday. “If you assume 1.9 per cent growth, my guess is you’ll never see a balanced budget again.”
Even some Republican lawmakers said they were unsure just how the budget could deliver its pledge of sustained 3 per cent growth beginning in 2020 — a critical factor in the administration’s forecast that the budget would achieve a surplus in 2027. The administration has refused to cut programs that benefit older Americans such as Social Security and Medicare. As a result, its projections of lower deficits depend on faster growth and trillions of dollars cut from domestic programs.
House Speaker Paul Ryan stopped short of embracing the administration’s budget projections. Ryan, a Wisconsin Republican, said faster growth would solve “many of our problems,” but “whether or not we hit those numbers or not, I don’t know the answer to that because I haven’t seen all of those numbers.”
Similarly, Rep. Mark Sanford, R-South Carolina said, “I’m not seeing how you mathematically.”
“If we lay out unrealistic projections, it confuses people and it allows people to think there can be a free lunch where there isn’t one,” the congressman added. “Supposedly you can put these different pieces of the puzzle together in a way that you don’t touch entitlements. But the reality is you can’t. So it creates a lie that we all then either address or don’t address, but it makes for a make-believe debate that I find frustrating.”
Two major factors usually determine how fast an economy can grow. Both can be influenced to some extent by taxes and government spending.
First, the rate at which workers enter the economy can propel growth. But the aging baby boomer population means this rate has been slowing and dampening growth relative to the levels enjoyed in the several decades after World War II, when growth averaged close to 3 per cent.
The 1990s were a boom time in part because the baby boomers had entered their peak earning years. That advantage no longer exists. The Trump budget also seeks to curb illegal immigration, which could discourage foreigners — even those with visas — from entering the country and increasing the size of the workforce.
Because of the aging population, Trump cannot return the economy to 3 per cent growth, said Bill Hoagland, a senior vicepresident at the Bipartisan Policy Center who formerly served as a Republican aide on the Senate Budget Committee.
“There is one thing he cannot change — the demographics,” Hoagland said.
Second, people can become more productive by generating more income per hour worked. This generally requires workers to cultivate skills and graduate from college or for companies to deploy new technology that enhances
Poor and disabled big losers in Trump budget; military wins STEPHEN OHLEMACHER
THE ASSOCIATED PRESS get there WASHINGTON — The poor and the disabled are big losers in President Donald Trump’s $4.1 trillion budget proposal while the Pentagon is a big winner. Trump’s plan for the budget year beginning Oct. 1 makes deep cuts in safety net programs, including Medicaid and the Children’s Health Insurance Program. The proposal also includes big cuts in Social Security’s disability program. Defence spending and border security would get significant boosts. The winners and losers: WINNERS • The military: Trump’s budget proposal would add $469 billion to defence spending over the next decade. Border security: The proposal includes $2.6 billion for border security technology, including money to design and build a wall along the southern border. Trump repeatedly promised voters during the campaign that Mexico would pay for the wall, a notion that Mexican officials rejected. Instead, the U.S. taxpayer will foot the bill. The elderly: Trump’s budget plan does not address Social Security or Medicare benefits for retirees, even though both programs are on track to become insolvent in the coming decades. New parents: The budget plan includes a new paid leave program for the parents of newborn children. Under the program, mothers and fathers could take up to six weeks of paid leave after the birth or adoption of a child. Trump’s budget summary says the program is fully paid for but includes only $19 billion over the next decade. Veterans: The budget proposal calls for an increase for the Veterans Administration, including $29 billion over the next decade for the Choice program. The program allows veterans to seek outside medical care from private doctors. Doctors: The budget proposes to cap jury awards in medical malpractice lawsuits. Medicare and Medicaid fraud prevention efforts would get a $70 million increase next year. LOSERS • The Poor: Trump’s budget would
slash Medicaid and the Children’s what workers already do. The challenge is that over the coming decade the Trump budget would cut nearly $3.6 trillion from benefit programs and domestic agencies that help fund education and research.
Hoagland noted that many of these programs are “necessary” for investing in workers to increase productivity.
The Trump administration’s assumed growth contrasts sharply with the average of roughly 2.3 per cent that the Obama administration projected in its fiscal 2017 budget proposal. The gap between the Trump budget and the CBO estimates is “unprecedented,” accordingly to an analysis by Chad Stone, chief economist at the Center for Budget and Policy Priorities, a liberal think-tank .
But part of the problem is the notion that the Trump tax cuts — the administration has produced only a one-page sketch of its plan — would boost growth and simultaneously reduce the deficit. Not a top academic economist surveyed this month by the University of Chicago said such a feat was possible given today’s economic and demographic circumstances.
Jason Furman, a chairman of the White House Council for Economic Advisers under Obama, suggested that the Trump administration had double-counted the supposed benefits of its tax cuts. It assumed that new lower rates would increase growth, while essentially using the existing rates to justify the higher tax revenue to close the deficit gap.
Mulvaney insisted that the administration had been prudent in its estimates of tax revenue and rejected the premise that a tax cut must lead to lower tax revenue.
Furman noted that the administration has yet to publicly reveal specifics of its policies, making its projections of growth and revenue suspect.
Trump is “starting with a growth rate without even saying what the policy is,” he said. • • • • • • • • • • • Health Insurance Program by $616 billion over the next decade. These programs provide health insurance for millions of poor families. The Poor, Part II: Trump’s budget would cut the food stamp program by $191 billion over the next decade. The Poor, Part III: Trump’s budget would cut funding for the Temporary Assistance for Needy Families (TANF) program by $22 billion over the next decade. The Disabled: Trump’s budget calls for cutting Social Security disability benefits by nearly $70 billion over the next decade by encouraging and, in some cases, requiring people receiving the benefits to re-enter the workforce. College Students: Trump’s proposal would cut student loans by $143 billion over the next decade. Farmers: The budget plan would cut farm subsidies by $38 billion over the next decade. Young Workers: By not addressing Social Security or Medicare benefits for retirees, Trump’s budget increases the likelihood that young workers will eventually face either significant benefit cuts or big tax increases. Social Security’s trust funds are projected to run dry in 2034 and Medicare’s is projected to run out of money in 2028. If Congress allows either fund to run dry, millions of Americans living on fixed incomes would face steep cuts in benefits. The Great Lakes and the Chesapeake Bay: Trump’s budget would eliminate the Great Lakes Restoration Initiative and the Chesapeake Bay Program, saving $427 million next year. Planned Parenthood: The budget would prohibit any funding for certain entities that provide abortions, including Planned Parenthood. The Centers for Disease Control and Prevention: The agency, which fights everything from AIDS to Zika, would have its budget cut about 18 per cent, to $6.3 billion. The National Institutes of Health: The budget for the premier medical research agency would be cut by 18 per cent, to $26 billion. Science: The American Association for the Advancement of Science estimates the budget proposal would cut overall federal spending on scientific research by 16.8 per cent.