President Trump has outdone Ronald Reagan in at least one respect: unrealistically rosy forecasts for economic growth. In 1981, President Reagan’s first budget predicted growth well above the consensus of private forecasters, in a bid to justify large tax cuts and increased defense spending. When the promised growth did not materialize, the deficit and debt ballooned.
Now Mr. Trump is leading the economy down a primrose path that is even more unrealistic.
.. There are two components to economic growth: adding more workers and increasing their productivity. Faster growth in the 1980s was the result of the former, an expanding workforce driven by two irreproducible demographic factors: the baby boomers’ entering their prime working years, and women’s continuing influx into the workforce.
.. Today the baby boomers are hitting retirement. As a result, Reagan-era productivity gains of 1.6% a year would now generate economic growth of only 1.7%.
.. driving growth up to or above 3%. But it is not very likely. My simulations, based on historical data, suggest a 1 in 25 chance of hitting this target over the next decade.
.. the budget effectively double-counts the tax cut’s economic effect—using it once to pay for the tax cut itself and a second time to boost revenue by $2.2 trillion, so as to show a lower projected path for the deficit.
The primary driver of savings in Mr. Trump’s budget comes from more than $800 billion in cuts to Medicaid, the federal-state health program for the poor, despite a pledge from the president on the campaign trail not to touch the program.
.. Mr. Trump’s budget director Mick Mulvaney said Monday much of the savings will come from changes in the GOP’s health-care overhaul bill, which Mr. Trump supports. But the administration’s budget would cut more than $600 billion from Medicaid and the federal Children’s Health Insurance Program on top of the $250 billion saved from repealing and replacing the Affordable Care Act.
.. Many economists have questioned whether the economy can grow much faster than its current pace without long-term investments in programs that boost worker productivity or help expand the labor force.
.. slash funding for disability insurance by $72 billion. Other spending cuts include $143 billion from changes to student-loan programs, $63 billion in reduced retirement benefits for federal employees, and $38 billion to curb certain farm subsidies.
Trump’s budget plan would follow through on a bill passed by House Republicans to cut more than $800 billion over 10 years.
.. The Congressional Budget Office has estimated that this could cut off Medicaid benefits for about 10 million people over the next decade.
.. The White House also will call for giving states more flexibility to impose work requirements for people in different kinds of anti-poverty programs
.. Numerous social-welfare programs grew after the financial crisis, leading to complaints from many Republicans that more should be done to shift people out of these programs and back into the workforce. Shortly after he was sworn in, Trump said, “We want to get our people off welfare and back to work. . . . It’s out of control.”
.. In that budget, he sought a big increase in military and border spending combined with major cuts to housing, environmental protection, foreign aid, research and development.
.. The White House also is expected to propose changes to the Supplemental Nutrition Assistance Program, though precise details couldn’t be learned. SNAP is the modern version of food stamps, and it swelled following the financial crisis
.. As the economy has improved, enrollment in the program hasn’t changed as much as many had forecast.
.. An average of 44 million people received SNAP benefits in 2016, down from a peak of 47 million in 2013. Just 28 million people received the benefits in 2008.
.. SNAP already has a work requirement, which typically cuts benefits for most able-bodied adults who don’t have children. But states were given more flexibility during the recent economic downturn to extend the benefits for a longer period
.. the U.S. government spends between $680 billion and $800 billion a year on anti-poverty programs, and considering wholesale changes to many of these initiatives is worthwhile, given questions about the effectiveness of how the money is spent.
.. it could pave the way for states to pursue even stricter restrictions, such as drug tests, that courts have often rejected.
.. In March, the White House signaled that it wanted to eliminate money for a range of other programs that are funded each year by Congress. This included federal funding for Habitat for Humanity, subsidized school lunches and the U.S. Interagency Council on Homelessness
.. a change in the funding for Social Security’s Supplemental Security Income program, which provide cash benefits for the poor and disabled.
.. budget director, former South Carolina congressman Mick Mulvaney
.. A key element of the budget plan will be the assumption that huge tax cuts will result in an unprecedented level of economic growth.
.. these tax cuts would end up creating trillions of dollars in new revenue, something budget experts from both parties have disputed.
.. The tax cuts would particularly benefit the wealthiest Americans, as Trump has proposing cutting the estate tax, capital gains and business tax rates.
.. there has been a deficit in the United States every year since the end of the Clinton administration
.. “People think government is cheaper than it is because we’ve allowed ourselves to borrow money for a long period of time and not worry about paying it back.”
.. Its premise is that the creation of more wealth will help all Americans succeed, and the Trump administration believes that some anti-poverty programs have created a culture of dependency that prevents people from re-entering the workforce.
.. “I don’t think the Republicans on the Hill are going to feel a strong compulsion to follow the president,” Haskins said. “They are not afraid of him.”
.. the White House is expected to call for $200 billion for infrastructure projects and an additional $25 billion over 10 years for a new program designed by Ivanka Trump that would create six weeks of parental leave benefits.
It appears Trump has taken the Democrats to the 11th hour by making them think the fight over the budget would be all about the border wall. They may have taken the fake and not organized an effective assault on the budget. Dare I say Trump is skillfully navigating Washington’s budget realities?
.. The president is disappointing the Democrats who thought he’d be insistent, with no flexibility. Perhaps the Democrats are being played. Trump may have been bluffing all along to distract the left into thinking this budget battle would be all about the wall.