Trump's Budget Math Grapples With Economic Reality

WASHINGTON — President Donald 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 Monday, is a brief departure: It concedes, for the first time, that the administration’s past projections were too optimistic.Trump’s $4.8 trillion budget proposal is slightly larger than last year’s $4.

It then predicts growth above 3% 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% annually in that time. By 2030, the administration predicts the economy will be more than 15% larger than forecasters at the budget office do.

Robust economic growth rates are not the only area in which 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.

In order to justify that optimism, administration officials are contending that their overly optimistic growth forecasts of the past were a fluke of circumstance. Officials Sunday attributed a half-point of the missed forecast last year to the effects of U.S. 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.

So deficits and unfunded tax cuts do matter!

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