Trump's Budget Doesn't Make Sense
The following op-ed by Maya MacGuineas, president of the Committee for a Responsible Federal Budget, was published in the New York Times today.
President Trump entered office facing the worst ratio of debt to gross domestic product of any new president in American history except Harry Truman – an onerous 77 percent. So, like many presidents before him – including, most recently, President Barack Obama, who had to respond to the economic crisis he inherited – President Trump is faced with the choice of whether and how to confront a looming situation not of his own making.
To his credit, the president put forth the goal of balancing the budget over a decade and starting to reduce the debt. Still, goals don't balance budgets, tough choices do. President Trump's budget sticks to his campaign promises – including increasing military spending, investing in infrastructure, talk of tax cuts without specific offsets and "protecting" Social Security and Medicare, a reassuring political promise that removes over one-third of the budget from consideration.
The problem is, those promises didn't add up on the campaign trail, and they don't now.
On paper, the $1.3 trillion deficit projected for 2027 would be erased under the Trump budget. But there are a lot of heroic assumptions made to get there. A full $300 billion, including interest, comes from a 40 percent cut to nonmilitary discretionary spending, with much of the savings coming from simply assuming non-specified reductions. An additional $100 billion comes from timing shifts, one-time payments and an ambitious estimate for reducing waste, fraud and abuse.
The largest savings come from aggressive growth assumptions, which would generate $500 billion in a single year. Exaggerated growth assumptions in presidential budgets are an age-old tradition, but this budget takes it to new levels, assuming we reach 3 percent growth, a full percentage point above what the Congressional Budget Office forecasts. With the baby boomers leaving the work force, demographics are destiny, and there just is no reliable plan to increase growth that much. We should do everything we can to try, including pursuing many of the president's policy priorities – like tax reform and smarter spending and regulations – but we should be realistic about expectations, and sustained 3 percent growth is almost certainly unobtainable.
Furthermore, these numbers come before incorporating what the White House has promised to be "one of the biggest tax cuts in American history," which is conspicuously missing from the budget altogether. Indeed, the budget seems to assume tax reform will increase revenues, at odds with everything the administration has proposed and said on the issue.
There are plenty of hard choices the budget proposes, for which the administration deserves credit. But many of the budget cuts fall disproportionately on public investments, support for families and assistance for low-income Americans.
While there are potential savings to be found in all areas of the budget, this pressure on a relatively small sliver of it, which is not where the spending growth comes from, results from trying to square the circle of balancing the budget while taking the largest contributors to spending growth – Social Security and Medicare – off the table and simultaneously maintaining we don't need to consider raising taxes. This approach is likely not only to receive pushback from Democrats but also to cause considerable consternation in President Trump's own party.
The president has proved repeatedly that he is his own thinker and not beholden to the traditional views of either party. This heterodoxy is appealing in certain situations, but when it comes to tough budget choices, he is eschewing the hard choices both parties have traditionally been at least willing to consider.
Yes, Republicans have a blind spot when it comes to acknowledging that revenues must be a part of the fix. But to their credit, many Republicans – including, notably, Paul Ryan, the speaker of the House – have made the case for why we have to reform our largest entitlement programs, including Social Security and Medicare (though there has recently been a disquieting silence on the topic). And many Republicans are taking the responsible position that tax reform should at least be revenue neutral.
Democrats, many of whom too often act as demagogues on entitlement reform, are clear that taxes must increase (though they also must stop pretending it is just millionaires who will be affected). They also have been admirable in their commitment to the pay-as-you-go principle in recent major legislation, which at least keeps us from digging the hole deeper.
President Trump doesn't align with either camp. If he continues to maintain that none of the big-ticket items in the budget are on the table, there is little hope that his budget could actually achieve balance.
Fixing the budget will require presidential leadership. If President Trump plans to leave office not having added trillions of dollars more to the debt, he is going to have to reconsider some of his promises.
