WASHINGTON – The good news about U.S. President Donald Trump’s proposed 2020 budget is that it vividly illustrates the basic causes of large, chronic deficits — a mismatch between the government’s commitments and the taxes needed to pay for them. The bad news is that the budget does virtually nothing to close the gap.
“We must protect future generations from Washington’s habitual deficit spending,” Trump said in his budget message. Actually, he would make matters worse.
Under his budget, the federal government would spend $4.7 trillion in fiscal 2020, a 15 percent increase from the $4.1 trillion in 2018. With tax receipts at $3.6 trillion, the projected deficit is $1.1 trillion. Although the economy is at or near “full employment,” the annual deficit remains around $1 trillion until 2023 and then begins to decline, though it’s still in deficit by 2029 when the projections stop.
Even these figures are optimistic, because — as the Committee for a Responsible Federal Budget, a nonpartisan advocacy and research organization, says — “the budget is riddled with gimmicks and unrealistic assumptions.”
The most obvious of these is projected economic growth. The Trump administration argues that, under its policies, economic growth (the increase of gross domestic product) will average about 3 percent over the next decade. By contrast, private forecasters predict growth at about 2 percent annually. Higher growth would mean billions of added tax revenues. Prudent policy would base its forecasts on the lower figure and hope that it’s too cautious.
The administration also erred in concentrating its steep spending cuts on “non-defense discretionary” programs — a catch-all that includes environmental protection, the Justice Department, low-income housing assistance, child care, national parks and many other agencies. The Center on Budget and Policy Priorities, a left-leaning advocacy group, reports that Trump’s proposals would reduce spending by 12 percent for the Department of Health and Human Services, 18 percent for the Department of Housing and Urban Development and 31 percent for the Environmental Protection Agency.
Congress, which sets spending, seems likely to resist such deep cuts. For example, Trump would cut college student-loan programs by tightening repayment requirements. Over a decade, the estimated savings would be $207 billion. This would almost certainly be unpopular. Similarly, Trump’s budget also includes a proposal to reduce federal payments to hospitals to cover their costs of unreimbursed care. Hospitals seem bound to fight that.
A final misunderstanding involves defense spending. Under the Trump budget, it receives a 5 percent increase in 2020, and this has been widely interpreted as a huge gain. That’s questionable. Although total military spending would rise, its long-term growth would be less than the economy’s rate of growth. In 2018, defense spending was 3.1 percent of GDP; by 2029, this share declines to 2.3 percent. The difference of almost 1 percentage point of GDP is (at today’s prices) about $200 billion.
What this country desperately needs is an honest debate over the role of government, discarding programs that do not qualify and paying for the rest with new taxes. The relevant cliche is the unpopular reality: Neither Republicans nor Democrats want to make tough choices. The main purpose of Trump’s budget seems to be re-electing Trump in 2020.
The budget, in short, is a fantasy. The actual deficits may be larger than the official figures.
But anyone who thinks Democrats are more responsible hasn’t been paying attention. It’s imperative to deal with the costs of retirees and health care, which are the largest part of the budget. For decades, Democrats have refused. Little has happened. And now Democrats back proposals (Medicare for all, guaranteed jobs, free college) that would raise spending even more.
Trump’s budget shows where the inattention has landed us. The proposal is so skewed that, just possibly, it will force our leaders to face the world as it is, not as we would like it. That’s a long shot, but it’s the only one we’ve got.
Robert J. Samuelson writes a column on economics for The Washington Post. © 2019, The Washington Post Writers Group