Two Trillion Dollars Is Nothing When It Comes To MAGA
The White House budget released on Tuesday appears to have double-counted more than two trillion dollars in estimated tax revenue. As such, the budget would not balance over 10-years (as promised), even if the U.S. economy were to hit sustained 3% growth (as projected by the White House, but literally no one else). This double-count is a big unforced error.
Two Trillion Whole Dollars
Trump’s budget anticipates around $2.06 trillion in extra federal revenue over the next decade, based on the aforementioned increase in economic growth. That new money then would be used to offset Trump’s proposed tax cuts, as the Administration previously said that the tax cuts would be revenue-neutral. Unfortunately, that same $2 trillion also is earmarked for closing budget gap.
As Larry Summers explains:
This error is akin to buying a company assuming that you can make investments that will raise profits, but then, in calculating the increased profits, counting the higher revenues while failing to account for the fact that the investments would actually cost some money to make. The revenue generated by the investments might exceed their cost (though the same is almost never true of tax cuts), but that does not change the fact that the investment has a cost that must be included in the accounting.
The response by the White House has not been reassuring.
Harwood asks Mnuchin about double-counting gimmick: "This is a preliminary document that will be refined" #FiscalSummit
— David Wessel (@davidmwessel) May 23, 2017
Budget Director Mick Mulvaney:
“We did [the double count] on purpose… I’m aware of the criticisms and would simply come back and say there’s other places where we were probably overly conservative in our accounting. We stand by the numbers.”
Mulvaney’s statement is especially problematic. He basically admits they picked the growth number that would balance the budget and make their numbers work. He said they had to plug in a 3% GDP growth because if we are stuck at 1.6% we will never balance the budget. But he has no idea how the 3% growth number will be achieved. It’s smoke and mirrors without the mirrors.