Let’s say you’re planning next year’s family budget.
Should you (A) be honest about what you’ll probably spend and as realistic as possible about your likely income, taking into account there could be an unexpected downturn? Or (B) assure yourself you’ll get a big raise, tell yourself prices will fall, increase your spending, and obligate yourself based on a rosy scenario?
I hope you answered (A). Otherwise, I didn’t do a very good job writing that first paragraph. If you’re the architects of President Trump’s first budget outline, you instead chose (B).
The budget, released tellingly while Trump is out of the country, promises to transform the annual budget deficit that will be $559 billion this year into a $16 billion surplus by 2027. We’d still have the national debt – currently $20 trillion and growing – but at least we wouldn’t be adding to it.
Unfortunately, the budget relies on that aforementioned rosy scenario to get there.
On the spending side, it increasing money for defense while proposing cuts to spending programs, including popular ones such as Meals on Wheels, that are so deep that even conservative Republicans in Congress won’t support them. Meanwhile, it leaves untouched the primary drivers of the increasing national debt, Social Security and Medicare.
Meanwhile, Trump is promising tax cuts he says will spur so much growth they’ll pay for themselves – a promise that won’t come true, according to the nonpartisan Committee for a Responsible Federal Budget. Moreover, Trump’s budget relies on projections of 3 percent economic growth per year – an unrealistic number, considering the Congressional Budget Office expects the economy instead to grow 1.8 percent annually over the next decade.
I said “unrealistic,” not “impossible.” According to the Committee for a Responsible Federal Budget, the economy has averaged 3.2 percent growth since 1950, and there have been times when it grew even faster – 4.3 percent in the 1960s and 3.5 percent in the 1990s.
The difference between now and then is us, says the Committee. We’re now an older country, and certain to grow older. The baby boomers are now retiring, and retired people produce less than working people. Meanwhile, as the number of older Americans increases, so does the number of people accessing Medicare and Social Security, which, you’ll recall, President Trump’s budget doesn’t touch.
Given the fact that 70-year-olds don’t usually have children, the fastest way to reduce the age of the workforce is to import workers from the outside. But even that would be only a partial solution causing other problems. Besides, as you may have noticed, increasing immigration is not exactly a priority of the president’s, or of Arkansas’ Sen. Tom Cotton, for that matter, who argues that immigrants compete with Americans for lower-wage jobs.
It’s possible that some kind of private sector advance could spur the economy, much as the dot-com bubble helped make the 1990s boom possible. But remember, we call that a “bubble” for a reason. Anyway, we’re already in the middle of one of those advancements. Technological innovations have let the United States approach energy independence, and gasoline is cheap right now. Nevertheless, the economy’s been plodding along for years – not terrible, but not great.
Because of all these factors, the Committee for a Responsible Federal Budget says Trump’s plan will reduce revenues by $5.5 trillion. This would occur at a time when government expenditures for Social Security and Medicare are destined to increase, as will interest payments on the debt. And let’s face it, Congress isn’t going to cut spending drastically for Meals on Wheels.
Instead, the U.S. government should do what a prudent family does: Base its budgeting on what’s likely to happen – actually, worse than that – and on the basic math principle that subtracting from your income does not add to it. It doesn’t have to expect the worst-case scenario, but at least it shouldn’t depend on a rosy one.
Related: $23.33 less debt