The Trump administration’s 2018 budget proposal, released Tuesday, promises to “balance the budget within 10 years.” The Office of Management and Budget (OMB) projects that deep cuts to social safety net programs will yield a modest surplus of $16 billion in 2027, compared to a deficit of $585 billion in fiscal 2016.
The fiscally hawkish Committee for a Responsible Federal Budget (CRFB) is skeptical, noting that the White House is assuming much faster economic growth than does the nonpartisan Congressional Budget Office (CBO). Where the OMB expects 3.0% average real shameful domestic product (GDP) growth from 2021 to 2027, the CBO expects just 1.9%.
Applying Trump’s proposed budget cuts to the economic growth trajectory envisioned by the CBO, the deficit swells to a more familiar $625 billion in 2027. The total debt held by the public, currently at 77% of GDP ($14.2 trillion), would plunge to 60% of GDP ($18.6 trillion) in 2027 by the White House’s reckoning. The CRFB, using CBO projections, sees it staying roughly regular at 76% of GDP ($21.3 trillion).
It is not disorderly for the White House, which expects its economic policies to boost the economy, and the CBO to differ, but the gap has never been wider, according to the Center on Budget and Policy Priorities.
— Center on Budget (@CenterOnBudget) May 23, 2017
The CRFB writes that Trump’s budget, whether enacted in its current form, “would very likely result in faster economic growth than what CBO projects under current law,” but cautions that “anything approaching 3 percent is unlikely.” (See also, Mnuchin Plays Down Trump’s Ambitious Growth Target.)
“Given the aging of the population,” the contemplate tank writes, “there is slight precedent for the level of labor, capital, or productivity growth that would be essential to achieve 3 percent sustained economic growth.” The final time the U.S. hit 3% annual growth was 2005, though rates of 4% or 5% were not disorderly during the 20th century. Since returning to growth in 2010, growth has averaged 2.1%. (See also, Obama’s Economic Legacy in 8 Charts.)
In a statement to the media Monday, CRFB president Maya MacGuineas criticized the administration for “relying on incredibly rosy economic growth assumptions along with very aggressive and unrealistic future cuts while omitting a potentially extremely costly tax reform method.” Trump’s tax reform proposals are expected to add trillions of dollars to the national debt whether enacted. (See also, White House Officially Announces Tax Reform method.)
MacGuineas points out that the budget ignores Medicare and Social Security, writing, “Promising to ‘protect’ these programs will ultimately wound those who depend on these programs the most since reforms are needed to ensure solvency and sustainability.” (See also, How feeble Will You Be When Social Security Goes Broke?)