President Donald Trump's new budget plan is one of his most extreme yet, slashing trillions of dollars in funding for everything from Medicaid to food stamps to the Environmental Protection Agency — a measure that his administration contends will be enough to balance the federal budget by 2035, even including the gigantic tax cuts for corporations and billionaires enacted at the end of 2017.
But according to Jim Tankersley in The New York Times, it probably won't even do that — because the administration is assuming tax receipts will rise due to a massive, 3 percent a year sustained economic expansion that no reputable agency considers likely.
"President 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 on Monday, is a brief departure: It concedes, for the first time, that the administration’s past projections were too optimistic," wrote Tankersley. "Then it goes right back to forecasting 3 percent growth, for the better part of a decade."
"According to summary tables reviewed by The New York Times and interviews with administration officials, the new budget will forecast a growth rate for the United States economy of 2.8 percent this year — or, by the metric the administration prefers to cite, a 3.1 percent rate. That is more than a half percentage point larger than forecasters at the Federal Reserve and the Congressional Budget Office predict," wrote Tankersley.
"It then predicts growth above 3 percent annually for the next several years if the administration’s economic policies are enacted," continued Tankersley. "The Fed, the budget office and others all see growth falling below 2 percent annually in that time. By 2030, the administration predicts the economy will be more than 15 percent larger than forecasters at the budget office do."
Moreover, wrote Tankersley, the administration also bases its forecast on the assumption that the Federal Reserve will not raise interest rates in response to their hypothetical 3 percent sustained growth, which in reality economists say they almost certainly would. Higher interest rates would mean the government's interest payments on Treasury bonds would increase, making deficits larger.
The administration, for its part, acknowledges its previous optimistic forecasts haven't worked out, but, wrote Tankersley, "officials on Sunday attributed a half-point of the missed forecast last year to the effects of American 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."
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