After signing nearly $5 trillion of new debt into law since taking office, President Trump’s Fiscal Year 2021 budget proposal provides the clearest look yet at how he intends to govern if re-elected in November. The ironically titled “Budget for America’s Future” is anything but: it proposes to slash critical public investments that lay the foundation for long-term growth, double down on reckless tax cuts for the rich, undermine health-care and safety-net programs for millions of Americans, and leave the nation on a path of trillion-dollar deficits as far as the eye can see.
The Trump administration claims its proposals would put the federal budget on a path to balance by 2035, but this relies upon economic assumptions that are downright absurd. The Office of Management and Budget projects real gross domestic product will grow more than a full percentage point faster than does the non-partisan Congressional Budget Office every single year between 2020 and the end of the projection period. That annual difference may not sound like a lot, but it adds up: the Trump administration’s fiscal estimates depend on the U.S. economy producing nearly $25 trillion more in output over the next decade than CBO projected in its most recent budget and economic outlook.
These outlandish economic growth projections enable the Trump administration to claim that it will raise $3.1 trillion more in revenue over the next decade relative to CBO’s baseline, when in reality the administration is proposing tax cuts that would actually reduce revenue. Trump proposes to extend the individual income tax cuts created by the GOP’s 2017 tax law past their scheduled expiration in 2025. But interestingly, even as Trump proposes to extend tax cuts for wealthy individuals, his budget would not extend the few expiring business provisions that some economists believe could potentially increase domestic business investment. This omission is further evidence that Trump is underestimating the cost of his policies while overestimating the boost they would give to economic growth.
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