Trump’s Problematic Math: Budget Plan Adds Growth, but Doesn’t Subtract Cost

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from The New York Times,

President Trump’s budget proposal, unveiled on Tuesday, purported to show the benefits of cutting taxes on businesses and consumers: By the end of the decade, faster growth could balance the federal budget.

The numbers looked great because the White House left out something essential: the cost.

When the government cuts taxes, it collects less money. That is the purpose of a tax cut. But Mr. Trump’s budget does not include any hint of a decrease in federal revenue. To the contrary, it projects that federal tax revenue will increase every year for the next decade.

The White House is indeed projecting faster economic growth as a consequence of tax cuts. What it is not doing is projecting the cost of those tax cuts: that is, the loss in tax revenue. It is the rough equivalent of trying to raise $10,000 for a project expected to produce $100,000 in revenue, and telling investors the profit will total $100,000. It won’t, because you have to account for the cost.

Lawrence H. Summers, the Harvard economist who served in senior roles in both the Clinton and Obama administrations, wrote in The Washington Post that it was “the most egregious accounting error in a presidential budget in the nearly 40 years I have been tracking them.”

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