Politics & Policy

The Corner

The Power of Assumptions: Budget Edition

President Trump’s FY 2019 budget is out. It is incredibly unrealistic and doesn’t prepare us for the nasty fiscal reality that we will soon face. Now, I should say that every presidential budget is unrealistic. They all project strong and positive economic-growth rates over the ten-year budget window that never materialize. They all promise savings that never see the light of day. They all use budget gimmicks.

But this one is particularly bold coming right after last week’s horrendous budget deal.

In the budget director’s defense, since all budgets are wishful thinking rather than serious and thoughtful documents, I welcome the effort made in this one to at least think through which programs should be terminated altogether. This budget does that and comes up with 22 programs. I could conservatively come up with ten times more budget items to terminate or push down to the states, but that’s a start. Unfortunately, there is no chance that this list will go anywhere, because Congress has no interest in cutting anything out of our gigantic budget. It is still, however, a useful exercise.

The budget also includes a budget-savings document with lots to like. Congress won’t like it, and it won’t go anywhere — but, again, I think it is a useful thing to do, because the time will come when Congress will have no choice but to cut, and now someone has thought through those cuts ahead of time and provided a map.

This list is particularly unrealistic considering that the programs up for reform or termination are all concentrated in the nondefense and entitlement sides of the budget. Adding insults to injuries, the budget jacks up defense spending by roughly $800 billion, infrastructure spending by the promised $200 billion, and also makes some of the expiring provisions in the tax-reform plan passed last December permanent.

Second, even if defense spending wasn’t growing so much, nondefense spending cuts of 40 percent would never materialize right after Congress just passed a nice 10 percent increase in nondefense spending.

All this is to say that if the spending cuts aren’t happening, neither are the projected savings. The economic-growth assumptions are unrealistic in the long run, too. They always are. The short run could see some solid growth, as long as the president stays away from threatening to withdraw from NAFTA and doesn’t scare away all immigrants.

As for spending cuts touted in the press releases, they don’t mean that the government will be spending less money than the year before. In the best-case scenario, they represent a hope that spending growth will come down in the next few years. In FY 2019, the plan is to spend $4.4 trillion, which will grow into $6.1 trillion in FY 2028. That’s a $1.7 trillion growth in spending.

Stronger economic-growth projections (which I doubt can be sustained over ten years short of an innovation miracle) allow for overoptimistic tax-receipts projections. If you add to that bogus spending cuts, you end up with unrealistic deficit projections. The budget projects that the deficit peaks in 2020 at $987 billion, which then starts going down in the out years. The deficits will be down to $363 billion in FY 2028. That would, in turn, allow for lower interest payments than previously projected, and a reduction in the public debt from 80 percent of GDP in FY 2019 to 72.6 percent of GDP in FY 2028. Gross debt would go down, too, from 108.1 percent of GDP to 91.8 percent of GDP.

Wouldn’t that be nice? Don’t count on it. We know what successful fiscal-adjustment packages look like, and this isn’t one.

Here are some numbers that will need updating upward soon:

‐ $45.5 trillion revenue collected over ten years

‐ $52.6 trillion in spending over ten years

‐ $7 trillion in cumulative deficits over ten years

Here is a good chart from Chris Edwards:

Editor’s Note: This post has been updated since its original publication.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

Most Popular

Politics & Policy

Students’ Anti-Gun Views

Are children innocents or are they leaders? Are teenagers fully autonomous decision-makers, or are they lumps of mental clay, still being molded by unfolding brain development? The Left seems to have a particularly hard time deciding these days. Take, for example, the high-school students from Parkland, ... Read More
Elections

Romney Is a Misfit for America

Mitt’s back. The former governor of Massachusetts and occasional native son of Michigan has a new persona: Mr. Utah. He’s going to bring Utah conservatism to the whole Republican party and to the country at large. Wholesome, efficient, industrious, faithful. “Utah has a lot to teach the politicians in ... Read More
Law & the Courts

What the Second Amendment Means Today

The horrifying school massacre in Parkland, Fla., has prompted another national debate about guns. Unfortunately, it seems that these conversations are never terribly constructive — they are too often dominated by screeching extremists on both sides of the aisle and armchair pundits who offer sweeping opinions ... Read More
U.S.

Fire the FBI Chief

American government is supposed to look and sound like George Washington. What it actually looks and sounds like is Henry Hill from Goodfellas: bad suit, hand out, intoning the eternal mantra: “F*** you, pay me.” American government mostly works by interposition, standing between us, the free people at ... Read More
Film & TV

Black Panther’s Circle of Hype

The Marvel Cinematic Universe (MCU) first infantilizes its audience, then banalizes it, and, finally, controls it through marketing. This commercial strategy, geared toward adolescents of all ages, resembles the Democratic party’s political manipulation of black Americans, targeting that audience through its ... Read More