If I understand Jonathan Chait correctly, the Trump administration is acknowledging that their budget would result in two trillion fewer dollars being collected in revenues over the next decade. But they are insisting that two awesome things will happen. The first is that this actually won’t happen because greater economic growth will produce the revenue after all. And the second is that this greater economic growth will also allow them to balance the budget.
For Chait, this is a simple error of arithmetic. It’s an example of double counting. First they assume two trillion in extra revenue based on higher economic growth (to make up for lower tax rates/fees), and then they assume an extra two trillion a second time (to bring the budget into balance).
We’re all familiar with the claim that huge tax cuts will pay for themselves. Reagan claimed that, but it didn’t happen. George W. Bush claimed that, and it didn’t happen. Chait doesn’t think it will happen this time either.
It seems difficult to imagine how this administration could figure out how to design and pass a tax cut that could pay for itself when Ronald Reagan and George W. Bush failed to come anywhere close to doing so. If there is a group of economic minds with the special genius to accomplish this historically unprecedented feat, it is probably not the fiscal minds who just made a $2 trillion basic arithmetic error.
It’s possible that this is exactly what Chait describes, but it’s also possible that it’s a lie made necessary by the fact that the Republican Party just spent the last decade obsessing about the deficit and now has a large caucus of genuine deficit hawks, plus an army of supporters whose tolerance for pivot-on-a-dime hypocrisy isn’t as high as the tax-cutters might wish.
After all, once you’re committed to the lie that your tax cuts will unleash absurd levels of economic growth that no economist will predict, what’s one more lie about math?
More than 35 American economists surveyed last week [by the University of Chicago Booth School of Business] disagree with a basic element of President Trump’s proposed tax plan: whether it will pay for itself. In an unusual display of unity, 100 percent of participating economists rejected the idea this week that Trump’s plans to drastically lower taxes on corporations, business, and individuals will create enough economic growth to offset the lost federal revenue and avoid adding to the national debt.
I’m just trying to imagine the Trump administration making a half-truthful claim that their budget won’t do a damn thing about the budget deficit and that it is only designed to be budget neutral. If Congress were to pass a balanced budget amendment, the Trump budget would violate the law, but they don’t want to admit that. So, it’s not enough to falsely claim that their budget won’t make the deficit problem worse; they have to make the further claim that their budget will actually balance. With this much incentive to lie, I am not ready to credit them with an honest error of addition.
But, as has become the pattern, I don’t think the lies will be effective:
Sen. Lindsey Graham (R-S.C.) said Tuesday that President Trump’s first budget was “dead on arrival” and wouldn’t make it through Congress.
“It’s not going to happen,” said Graham, according to NBC News. “It would be a disaster.”
In itself, a rejection of Trump’s submitted budget wouldn’t be very big news. The senate rejected Obama’s 2012 budget in a 99-0 vote and did the same to his 2015 budget by a 98-1 tally. The Republican forced those votes to demonstrate that even Democrats weren’t on board with the president’s priorities. This time around, the Republicans are not prepared to make cuts to Medicaid, the State Department, and foreign aid that are as steep as what Trump proposes.
But, if it were ever to get down to it, they’d also object to its effect on the deficit.
Considering just how dead on arrival this budget is, it’s a wonder that the administration feels the need to make such risible claims about it. But, then, they hardly hoard their credibility, do they?
Both! Floor wax and dessert topping!
Beat me to it!!!
Thanks…right on point.
AG
Me too!
I don’t understand the doubling … I thought the Trump budget assumed a very high growth rate (3%+) which would pay for the revenue reduction and balance the current and projected deficits.
It seems like that rate of growth is pretty unrealistic. Rosy Scenario must be back on the job.
It’s the difference between what they’re selling and what they know they’ve actually got — between the promise and the delivery — which has suddenly become all to real for Mr. “Art of the Deal” (even though for decades the line was invisible to him).
between ongoing deficits already “baked in the cake” of current laws and appropriations by Congress (i.e., “revenue neutral” in the sense of “wouldn’t make those ‘structural’ deficits any bigger than they are on an ongoing basis” — this relates to the difference between “deficit” and “debt”) . . .
. . . and the deficit-increasing effect (via revenue reductions) of Trump’s proposed tax-cut plan.
I.e., each of those would require $2T to zero it out to a balanced budget.
And who knows? I could be right! It could happen. Stranger things have.
I think what this is about is the two trillion. They say Trump’s budget will increase deficits by two trillion over the decade but they would need four trillion to make up for the deficit of two trillion until they get to the two trillion more collected each year. But not to worry these guys can do most anything. Fantasy is allowed.
Actually we do have a problem if deficits and debt are your worry. The current budget would accumulate a rather large deficit and higher debt as it is, no changes. So Trump is upset about our debt now, but he will also add to the debt, no reductions.
Solution per the Trump team: cut spending like Medicaid, welfare programs and such but spend on infrastructure and cut taxes. No matter about who dies.
I have no idea just now whether this can work. But increasing the growth rate is no easy task. And large deficits can lead to inflation which could happen with large tax cuts.
Getting the feeling that with T’s travel this week (evidently he “just got back from the Middle East”) we’re at the moment of Mercutio’s witty speech before everything falls apart
“Hoard their credibility”, please, not “horde”.
Normally I don’t nitpick stuff like this, but this is a pet peeve that drives me frothing wroth.
Sorry and thank you.
Tenet/tenant.
Don’t get me started.
Its/it’s, your/you’re, compose/comprise (an utterly lost cause at this point), allude/elude, principal/principle, altogether/all together….
Oh god oh god oh god oh god….
Being a proofreader by trade means never being able to turn off the critical eye, alas.
capital/ capitol
I worked as an editor/proofreader for years myself, and I still do a lot of it. I’m so OCD that I even pencil in marginal corrections in books that have already been published. Once an editor, always an editor.
The abusage that probably drives me farthest up the wall is “begs the question” for “raises the question” I will kill it any time I get the chance. “Begging the question” does not refer to a statment that prompts a uestion, but to the logical fallacy of circular reasoning (petitio principii).
http://grammarguide.copydesk.org/2012/02/10/we-beg-you-to-stop-begging-the-question/
I meant, “statement that prompts a question”
OK, Janicket, that’s why even a proofreader needs a proofreader.
As I know all too well.
Your supposed too hit the ‘preview’ button before you’re comment goes on line. That allows the commenter too check there’re comment fore errors.
Thats how I di it. Double checking helps, to.
.
*”Chuckling Out Loud”
aaaaaaarrrrrrgggggggghhhhhhhhhhhhhh
After a while (sob) that’s not even (whimper) funny….
groooooaaaaaaaannnnnnn
Speak for yourself!
I’m dying of laughter here.
I’m just dying….
. . . at you, _______.)
I have a tee shirt that reads: “They’re at their table over there.”
rein [in] /reign
. . . actual words, unlike tongue/”tounge”)!
When Mulvaney first submitted his “skinny budget” he said he and his staff developed the budget on the basis of things Trump said at his rallies. So this is hardly the result of any kind of thoughtful process. Moreover, Mulvaney is a radical Tea Party extremist with no understanding of federal government finance. As with every other Trump department head, Mulvaney is incompetent and self-destructive. But your post’s headline is a bit misleading; I’ll bet Trump has no idea what’s in his budget (other than the line item for the wall). The actual budget will be created by Congress and will look very little if at all like this one. As for the so-called “tax reform”, I am skeptical that we will see anything like what’s been proposed either.
Apparently Wall Street isn’t skeptical. For months, financial newsletters have been trumpeting (no pun intended) that Wall Street expects big earnings from those tax cuts and that is driving the stock market. On the other hand, Goldman-Sachs says to buy small caps because they believe the cuts will cause a huge surge in productivity. I’ve done pretty well by doing the opposite of what G-S recommends.
I’ll be honest…I’m looking for all the reassurance I can get that SSDI won’t get cut. Significant Other very dependent on it. As are several of my Senior neighbors.
To state the obvious: those are not mutually exclusive alternatives.
It’s not that 3% is terribly high, or even unrealistic.
It’s that there is very little provable causation between tax cuts and GDP growth one way or another, unless you are in a recession.
Somewhere I read that GDP growth is dependent on two variables: population growth (let’s say labor) and productivity. I have a hunch there is a hidden work force out there that could be employed if wages were increased. But if we are at full employment or near it, then cutting taxes and increasing infrastructure spending would lead to inflation. So Trump is going to cut current spending. So who knows where this comes out. But if he can’t gut Obamacare, Medicaid etc. then we get inflation.
That is right.
And the models suck at predicting inflection points in productivity. It is some ways the most important variable, and the least predictable.
I don’t think we are at full employment, so I don’t think higher inflation is likely though.
It’s not just the glaring $2 trillion point. The premise itself is certainly rife throughout the budget in all its little nooks and crannies. Missing is
anything beyond tax cuts as an engine for the economy to grow. The magic wand of capitalism needs unpacking and as I just heard, this budget is ‘more interested in bullets than butter’.
love the part about cost cutting by getting the malingerers off disability – is Chris Kobach going to be in charge of that?
And Boo, you are too generous, there’s always NY Mag’s take on it
Hey, don’t post that stuff when I’m eating at McDonalds.
Now I have milk shake up in my nose and all over the keyboard.
There is no such thing as a deficit hawk except in the media.
you obviously haven’t met the new breed.
You would have to enumerate the members of the ‘large’ caucus for me to respond intelligently. The Freedom Caucus only has 40 members
The Republicans across the board really only care about three things in order
to facilitate 1 and/or screw over Democratic constituencies.
3. Military spending
And actually they really only care about the second in order to inflict pain and when possible enact more tax cuts – the deficit is just a convenient excuse. As the sequester proved they clearly prioritize 2 over 3..
.
At no time will Republicans forego the opportunity for a tax cut due to any adverse impacts on the deficit. They may be constrained – by reconciliation, etc. – but Bush proved that’s only a formality. If McCain had won in 2008 the Bush tax cuts would have become permanent.
thwart GOP’s (especially House GOP’s)/Trump’s deep desire to “govern” [scare quotes obligatory] under the “Hastert-The-Molester Rule”, i.e., nothing passes except by “majority-of-the-majority” rule. Bipartisan-majority legislation not allowed.
cf. failure of TrumpNoCare v. 1.0.
Cleaned up the milkshake off my phone.
Our elites have been letting the world down for over two decades now. Some examples follow.
Global economic policy was driven for a significant period by a flawed, error filled (including simple Excel calculations) and, when errors were finally corrected, completely irrelevant paper by Reinhart and Rogoff. In other words, a paper that should not have even been published was cited as the rationale for austerity on a global scale for years.
Pretty simply put the people running the world, collectively, are functionally no smarter than above average folks who have been moderately successful in other areas. Of course, their credentials, money, and connections entitle them to an outsized influence relative to their talents.
Think of the US/UK leaders who pulled the western Allies through WWII and designed the post-war economic order, institutions, and won the Cold War. Or obviously, the US founding fathers that fashioned its inception in a world hostile to its ideals.
Granted, the results were not perfect in every respect. But those results could have been much, much worse and there was no road map for them to follow. In each case the improvisations by each .group in very fluid situations far exceeds the collective elite stupidity that’s been pretty rampant since 1995.
You write:
I disagree. Many of them are way above average in terms of intelligence of a certain kind. I like call it “tactical intelligence”…the ability to see ways to win in a competition and to put those tactics in efficient motion no matter what the cost to others. This presupposes a certain lack of moral intelligence, of course. They see the big picture and they see the holes in it. This means that they simply have neither the time or nor the interest to cross all the “t”s or dot all the “i”s. They leave that to their employees. Their “credentials, money, and connections” and not the only characteristics that separate them from the millions of other run-of-the-mill hustlers, and usually those things have been earned by massive success.
Take Donald Trump, for instance. The leftiness trope regarding Trump has been how stupid he is…stupid and lucky, because his father gave him a million dollar loan to get him started and he had some connections in a fairly low level of the NYC real estate business. At the same time that he was coming up I will guarantee that there were literally thousands of young hustlers in the U.S. who had exactly the same sorts of advantages as did Trump. More advantages, many of them, because they came from older, wealthier, more socially prominent and successful families. Look at George W. Bush, for instance. Until he was installed as a frontman president for the neocons he was a total failure in nearly everything that he had done. There’s your “stupid,” right thereIII
These “trillions” that are being argued here…the math has almost nothing to do with the administration of power. “A trillion here, a trillion there…we can always jigger the books or print more money…” The pet economists that are hired by all sides of the political/economic question are just that. Pet economists. Hirelings who know damned well on which side their bread is buttered and as a result produce “proofs” that buttress their employers’ desires. If one messes up? He or she is fired and there’s an end to it. The universities are producing thousands of economists every year, almost all of whom have an accuracy record that would shame your favorite local TV weatherman.
So what?
AG
P.S. That “pet economists” thing goes for pollsters, too. Bet on it.