The United States debt clock continues to tick, and as it gets closer to $20 trillion, we wonder if President Donald Trump will ever answer how he plans to address the debt by cutting taxes without making dramatic cuts to spending as well.
Now, it appears that one way the president hopes to balance the budget over the next decade is to simply assume that the tax cuts he wants to introduce will generate exactly a $2 trillion increase in revenue. But that's wishful thinking, to say the least.
After all, you cannot predict how much growth tax cuts alone will generate because taxes aren't the only barriers to entry in the market. So, assuming that the cuts alone will bring in a $2 trillion surplus is closer to a wild guess than an estimate based on solid facts. As a result, what many critics of the plan are now suggesting is that Trump's belief is nothing but “an embarrassing mistake.”
Aside from the $2 trillion, MarketWatch reports that the administration is also forecasting that the deficit will grow by $3.15 trillion over the next 10 years. The $2 trillion in projected growth then enters the picture as a way to cover for that deficit. The projection is nothing but a hopeful estimate that Trump's director of the Office of Management and Budget, Mick Mulvaney, sees as achievable. Analysts, on the other hand, aren't so sure.
By saying the U.S. will have $2 trillion in higher revenue thanks to Trump's plan is one thing, but to say that the potential growth will pay for the lost revenue while also generating extra earnings is misleading, especially if you look at the projected deficit.
While Trump himself isn't saying the potential growth will cover both the lost revenue and the extra amount needed to cover the growing defense and retirement spending, that appears to be the general assumption as he continues to say he will balance the budget without mentioning any real, tangible cuts.
Unless Trump's budget includes a solid plan for a serious, deep cut in spending (especially in defense since that's the single most burdensome aspect of U.S. government spending — not welfare), the $2 trillion line is nothing but a sideshow or a distraction. That alone makes us wonder if the president and his team have any idea of what they are doing when they suggest they can balance the budget basing their claims solely on the imagined growth the tax cuts will generate.
Banner/thumbnail credit: Reuters