In a recent op-ed Robert L. Bixby, executive director of The Concord Coalition, and Maya MacGuineas, head of the Campaign to Fix the Debt, explain why they have shifted their grade on President Trump’s proposed 2018 budget from “incomplete” in March to “incoherent” in its final form. They say the plan assumes away many problems and fails to confront many of the challenges that must be met to put the budget on a sustainable path. This column appeared on June 10 in the The Portsmouth Herald in New Hampshire.
In a recent op-ed Robert L. Bixby, executive director of The Concord Coalition, and Maya MacGuineas, head of the Campaign to Fix the Debt, explain why they have shifted their grade on President Trump’s proposed 2018 budget from “incomplete” in March to “incoherent” in its final form. They say the plan assumes away many problems and fails to confront many of the challenges that must be met to put the budget on a sustainable path. This column appeared on June 10 in the The Portsmouth Herald in New Hampshire.
As a follow-up to the First Budget project we headed in Iowa and New Hampshire during the 2016 presidential campaign, we gave President Trump’s limited set of budget proposals in March a grade of “incomplete” because they did not include critical items such as economic projections, health care reform, Social Security or tax policy.
We expressed the hope that when his full budget was released in May it would include a plan to put the nation on a sustainable fiscal path.
President Trump has now released his first full budget and we have changed our grade from “incomplete” to “incoherent.”
At an initial glance, the president’s budget might seem quite encouraging. The budget deficit shrinks in every year beyond 2019 and a small surplus is shown in 2027. The debt gradually comes down over 10 years from 77 percent of the gross domestic product (GDP) to 60 percent.
That would be a welcome development if the policies and assumptions contained within the budget supported these favorable outcomes. Unfortunately, they don’t. A close examination of the budget reveals a disappointing mix of unrealistic assumptions, gimmicks and punts. Even Republican leaders on Capitol Hill have declined to embrace it.
In total, the budget claims $5.6 trillion of deficit reduction through 2027. However, the largest component of this, $2.1 trillion, comes from an assumption that economic growth will surge from just under 2 percent annually to 3 percent within a few years.
That assumption is quite a stretch; potential economic growth is constrained by labor force participation and productivity levels. With baby boomers leaving the workforce in large numbers and productivity having declined in recent years it is wishful thinking at best to assume that economic growth will rebound to levels that were considered normal 20 or 30 years ago.
That is why the Congressional Budget Office (CBO), the Federal Reserve Board and the private sector Blue Chip average all project that economic growth will hover around 2 percent or below in the coming years.
Without its rosy economic scenario, the Trump budget would not come close to balance by 2027. Under more realistic economic assumptions, The Committee for a Responsible Federal Budget projects that the Trump budget would be in deficit by $625 billion in 2027 and the debt would remain about where it is now as a share of the economy.
That would still be an improvement over current “baseline” projections but there is reason to believe that actual results would be worse.
For one thing, the budget does not account for any revenue loss from Trump’s promised “massive” tax cuts. In fact, the details of tax reform are largely excluded from the budget although the presumed economic boost from tax reform seems to be part of the reason for the optimistic growth assumptions. This has led to understandable accusations of “double counting” because the same economic boost cannot both cover the lost revenue from tax cuts and provide $2.1 trillion of deficit reduction.
Another $850 billion of deficit reduction comes from a scoring gimmick that simply assumes without specifics that non-defense appropriations will be cut by 2 percent every year below the prior year’s total. By 2027, this would result in a cut of 40 percent and leave such spending at about one-third of its historic average.
Other, more specific, spending cuts come from mandatory spending programs focused on low-income Americans.
While no category should be exempt from scrutiny these disproportionate cuts in a relatively small slice of the budget — a part of the budget already projected to shrink as a share of GDP — fail to spread the burden of deficit reduction broadly among the population.
On health care, the budget assumes $250 billion of savings from repealing and replacing the Affordable Care Act (“Obamacare”). This is more than twice the savings CBO projects for the House-passed version of health care reform (the American Health Care Act). However, in addition to the AHCA’s $840 billion in cuts to Medicaid, the budget includes another $610 billion in Medicaid cuts. This is either one more double count or a wildly aggressive assumption about the Medicaid savings that can be achieved.
While growing health care costs, particularly in Medicare, are a threat to long-term budget sustainability, the president’s proposal leaves Medicare untouched and offers no substantive reforms to reduce health care costs.
Also conspicuously absent is any long-term reform of Social Security retirement benefits, although proposals are included to reform the much smaller Social Security disability program.
A president’s first budget is vitally important in outlining priorities and setting the tone for an administration’s term in office. It is disappointing, therefore, that President Trump’s first budget assumes away so many problems and fails to confront so many real challenges that must be met to put the budget on a sustainable path.
Maya MacGuineas is head of the Campaign to Fix the Debt. Robert L. Bixby is executive director of The Concord Coalition.
