Photo: Matt Rourke / AP
Over-ambitious budget plan of U.S. President Donald trump built on questionable arithmetic, stated in the American media a few economists. In fact, the team of the trump double counted the same $2 trillion in additional revenue, assuming they
Presented today the long-term budget plan of the White house involves the release of a balanced budget by the year 2027. This will be achieved through the total spending cuts of $3,56 trillion over ten years, and also due to additional income of USD 2.06 trillion over the same period. Thus, team trump’s plans to cut budget deficits a total of $5,63 trillion, it follows from the draft budget on the White house website.
Of USD 2.06 trillion is the estimated accumulated “effect from the response of the economy” fiscal policy in stimulating trump, in particular, from the promised tax cuts. In other words, the administration forecasts that the budget revenues in the amount of 10 years will be $2 trillion more than if fiscal policy had not changed.
At the same time informed us officials have signaled that tax reform, the details of which have still not been clarified, it will be budget neutral, that is, the loss from the reduction in tax rates will be offset by a subsequent increase in tax revenue due to higher economic growth (increasing the taxable income of households and corporate profits).
It turns out that the tax reform will be more than neutral for budget revenues, The Wall Street Journal writes that contrary to the statements of economic advisors trump. The increase in tax revenues due to the acceleration of the economy not only compensates for the loss due to lower rates, but will bring the Treasury an additional $2 trillion. The same contradiction sees non-partisan Committee for a responsible Federal budget (does not support either Republicans or Democrats), it follows from analytical post on its website.
Former Treasury Secretary Lawrence summers in the Washington Post suggested that the calculations of the authorities are built on “logical error, for which the student can put an f on the exam in elementary Economics course”. According to him, it’s like to invest in the company, to increase revenue, but the profit calculation does not take into account the cost of the investment. “The budget of the President of trump includes a mathematical error of $2 trillion,” the more categorical the title Time.
The budget plan the White house takes into account expected benefits from tax cuts, but does not account for losses, says a senior researcher of the Peterson Institute for the world economy Jason Fuhrman (former chief Advisor to Barack Obama on the economy). If the tax plan trump neutral from the point of view of income, the budget needs to be $2 trillion of additional revenue through economic growth, but $2 trillion of losses by reducing tax rates, leads him to the opinion of the Washington Post.
As the WSJ notes, the representative of management and budget the White house John Czwartacki denied error message double-counting in the budget plan, saying that “the budget considers the income from economic growth only once.” But without details of the tax plan budget math remains opaque.
Forecasts of economic growth incorporated in the project budget unrealistic, says the Committee for a responsible Federal budget. The administration of the trump lays GDP growth of 3% starting from 2021, but this far exceeds the expectations of external experts and will require stronger economic results than in the 1990s.