Budget director Mick Mulvaney says that tax reductions will be balanced by scaling back tax breaks. Tax reforms will be designed to raise as much revenue as the current tax code, without counting on any extra economic growth. Mulvaney expects that extra growth to materialize and produce new revenues–but those extra revenues will go to balance the budget.
Treasury secretary Steven Mnuchin says that the extra revenues from growth will be used to make the tax package balance. The new tax code will raise as much money as the old one after accounting for extra growth. In effect, then, he wants a tax reform plan that yields $2 trillion less in revenue than Mulvaney does.
If the Mulvaney view prevails, then either the administration’s proposed tax cuts have to be pared back or it needs to find new ways to scale back tax breaks. If the Mnuchin view prevails, then the administration has to either make steeper spending cuts or abandon the goal of balancing the budget even under ambitious growth projections.
Maybe Trump will make a decision about what he wants, or maybe Congress will figure it out. It’s hard to proceed much further without an answer. Even in Washington, D.C., $2 trillion is a lot of money.