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US Trump's Budget Math Grapples With Economic Reality

17:40  10 february  2020
17:40  10 february  2020 Source:   nytimes.com

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WASHINGTON — President Trump ’ s budget proposals have been defined by a belief that the economy will grow significantly faster than most economists anticipate. Past administrations have also dressed up their budget forecasts with economic projections that proved far too good to be true.

--President Trump ' s budget proposal contains a fundamental math error that counts trillion in imaginary expected economic growth twice

WASHINGTON — President Trump’s budget proposals have been defined by a belief that the economy will grow significantly faster than most economists anticipate. The latest version, set for release on Monday, is a brief departure: It concedes, for the first time, that the administration’s past projections were too optimistic.

a close up of a newspaper: President Trump’s proposed budget for the 2021 fiscal year was delivered to the Capitol on Monday morning.© Samuel Corum for The New York Times President Trump’s proposed budget for the 2021 fiscal year was delivered to the Capitol on Monday morning.

Then it goes right back to forecasting 3 percent growth, for the better part of a decade.

Mr. Trump’s $4.8 trillion budget proposal is slightly larger than last year’s $4.75 trillion request and calls for increased spending on the military, the border wall, infrastructure and other priorities, including extending the president’s 2017 tax cuts. It also includes trillions of dollars of cuts to safety-net programs like Medicaid and discretionary spending programs outside of the military, like education and the environment.

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Mr. Trump ’ s budget , the largest in federal history, includes a nearly 5 percent increase in military spending — which is more than the It is replete with aggressively optimistic economic assumptions and appeals to his core constituents, and it envisions deep cuts to programs that Democrats hold dear.

But Mr. Trump ’ s budget does not include any hint of a decrease in federal revenue. To the contrary, it projects that federal tax revenue will increase every year The White House is indeed projecting faster economic growth as a consequence of tax cuts. What it is not doing is projecting the cost of those tax

The White House makes the case that this is affordable and that the deficit will start to fall, dropping below $1 trillion in the 2021 fiscal year and that the budget will be balanced by 2035. That projection relies on rosy assumptions about growth and the accumulation of new federal debt — both areas where the administration’s past predictions have proved to be overconfident.

According to summary tables reviewed by The New York Times and interviews with administration officials, the new budget will forecast a growth rate for the United States economy of 2.8 percent this year — or, by the metric the administration prefers to cite, a 3.1 percent rate. That is more than a half percentage point larger than forecasters at the Federal Reserve and the Congressional Budget Office predict.

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Trump ’ s Bizarre Budget Math . May 24, 2017 by Ed Brayton. Not only does the Trump administration’ s budget proposal rely on economic growth assumptions that are wildly more optimistic than those produced by any private sector forecaster, but it turns out that embedded within those

Rep. Mark Sanford (R-S.C.) tore into President Trump ' s proposed budget in a hearing with the president' s budget director Mick Mulvaney on May 24.

It then predicts growth above 3 percent annually for the next several years if the administration’s economic policies are enacted. The Fed, the budget office and others all see growth falling below 2 percent annually in that time. By 2030, the administration predicts the economy will be more than 15 percent larger than forecasters at the budget office do.

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Past administrations have also dressed up their budget forecasts with economic projections that proved far too good to be true. In its fiscal year 2011 budget, for example, the Obama administration predicted several years of growth topping 4 percent in the aftermath of the 2008 financial crisis — a number it never came close to reaching even once.

Trump officials had considered their projections to be a break from that trend, writing last year that they were the first administration on record “to have experienced economic growth that meets or exceeds its own forecasts in each of its first two years in office.” That turned out to be wrong: In the middle of last year, the Commerce Department revised its accounting of the 2018 growth rate downward, to well below the rate Trump officials had forecast. Their predictions were similarly off in 2019.

US on track for first $1 trillion budget deficit since 2012

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The CBO says Trump ' s budget math overestimated economic growth to the tune of .4 trillion. (CNN) When the Congressional Budget Office The report points to different " economic effects that the administration attributes to its proposals" as a main reason for the split. CBO's estimate of the

President Trump ’ s budget includes what critics charge is a simple accounting error that adds up to a trillion oversight, though the White House said it stands by the numbers. Under the proposed budget released Tuesday, the Trump Administration’s proposed tax cuts would boost economic growth

Robust economic growth rates are not the only area where the administration’s renewed optimism appears in its latest budget. It has also revised down its estimate of the interest the federal government would pay to borrow money over the next decade, based largely on the assumption that the Fed, which began cutting rates in 2019, would raise them only modestly again over the next 10 years. The changes in rate assumptions reduce budget deficits by $1.5 trillion over the course of the decade, according to the administration’s projections.

Essentially, administration officials are contending that rising levels of debt in the United States will not drive up borrowing costs, as many conservative economists have long warned, at least for the next several years. They also believe, a rarity among economists, that a sustained stretch of 3 percent growth would not push the Fed to raise interest rates.

As a result, the administration sees federal debt held by the public — the national debt, essentially — declining from 79 percent of the overall economy this year to 66 percent in 2030. The budget office sees it rising, to 98 percent, a level not reached since 1946.

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Phony math is a time-honored tradition in the Washington world of budget making, but the first full fiscal plan The bottom line: A budget that the White House says will be in balance by 2027 would, in reality Let’ s take, for example, the White House’ s insistence that the economic -growth forecast of

On the campaign trail, candidate Donald Trump said he would eliminate the national debt “over a period of eight years.” But his first budget as president The budget uses an optimistic assumption about economic growth, which few economists believe is realistic, and assumes the president’ s tax plan is

In order to justify that optimism, administration officials are contending that their overly optimistic growth forecasts of the past were a fluke of circumstance.

Mr. Trump’s first budget, in the spring of 2017, predicted growth of 2.3 percent that year using the administration’s preferred measure — the change in the size of the economy from the fourth quarter of the preceding year. It was a mild undershoot; growth actually hit 2.5 percent.

The next two budgets predicted 3.1 percent growth for 2018 and 3.2 percent for 2019. Both were off, badly. Growth was 2.5 percent in 2018, from fourth quarter to fourth quarter, and 2.3 percent in 2019, according to the Commerce Department.

Officials on Sunday attributed a half-point of the missed forecast last year to the effects of American trade policy — specifically, uncertainty over resolution of trade talks with China and congressional approval of a new trade agreement with Canada and Mexico. They said those uncertainties were now resolved and that growth would accelerate accordingly.

The senior administration official also said that a General Motors strike, aerospace giant Boeing’s struggles with its 737 Max aircraft and flooding in the Midwest had reduced growth by an additional three tenths of a percent last year.

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At that point, Trump ’ s budget team said that the reductions would be revenue-neutral, arguing that the tax increases from economic growth would offset He pointed out that Trump ’ s proposal wasn’t even consistent with the tax plan in broad strokes. “As I understand it, there’s a page in this budget which

President Trump ' s 2021 budget proposal will demonstrate the arc of his first term as he abandons promises to balance the budget and make Mexico pay for the wall, while pulling back Trump ’ s new budget proposal expected to show how far he has moved away from some 2016 campaign promises.

Mr. Trump has long asserted that his push to negotiate with the Chinese and reopen North American trade talks were helping the economy. In the 2016 campaign, his advisers said that tariffs on Chinese imports — even more aggressive levies than what Mr. Trump ultimately imposed on Beijing — would increase growth, by pushing multinational companies to invest in the United States instead of China.

Such an investment wave never materialized. Capital spending growth turned negative for the last three quarters of 2019. Many forecasters believe that decline was trade-related; the budget office, among others, is predicting a bounce-back in investment growth this year. But those forecasters also see growth slowing, over all, as the stimulus fades from Mr. Trump’s deficit-swelling tax cuts in 2017 and spending increases he has signed each year in office.

Partly as a result of those measures, and the administration’s inability to interest Congress in any of its most aggressive proposals for cuts, the federal budget deficit was nearly twice as large last year as the administration projected in its first budget: It topped $1 trillion last year. The Congressional Budget Office predicts it will continue to grow, hitting $1.3 trillion in 2025 as growth slows to 1.5 percent.

  Trump's Budget Math Grapples With Economic Reality © Vladone / Getty

For that same year, the new Trump budget predicts the deficit will be less than half the size — and that growth will be just under 3 percent.

Democratic candidates' payroll tax hikes will hamper the economy .
The recent debates over how to fix growing budget deficits, recently highlighted by President Trump's fiscal year 2021 budget proposal and the latest Congressional Budget Office report, have motivated major Democratic presidential candidates to propose tax changes to the federal government’s funding of Social Security and Medicare, the major federal entitlement programs driving much of the projected budget deficit over the next 10 years. Unlike proposals that rely on spending cuts to ensure that the budget deficit is closed, these tax proposals would raise payroll tax rates and expand the payroll tax base for high earners.

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