Regardless of the details, the budget released Tuesday by the Trump administration was likely to be met with opposition from the Democrats for the scope of the cuts it proposed to programs that help low-income Americans. But, big-picture disagreements aside, people assumed that those details would at least add up.
Not the case: There appears to be a major problem with the details of Trump’s budget—namely, that it fails to account for the loss of trillions of dollars of revenue that will result from the tax cuts it proposes. Left-leaning economists have been quick to highlight the omission, which, as former Treasury Secretary Larry Summers wrote in The Washington Post, “would justify failing a student in an introductory economics course.” Others are characterizing it not as an error but a deliberate manipulation: “The unreality/gimmicks in this budget are an [sic] unprecedented, epic scale,” Jason Furman, former chairman of the Council of Economic Advisers under Barack Obama, wrote on Twitter.
In short, the budget fails to properly use what is called dynamic scoring, which tries to capture how policy changes will affect future revenues. In the budget, the administration forecasts healthy economic growth in the years ahead—specifically, that the economy will grow at a rate of three percent annually in many of the coming years (more on that rosy number later). Why do they think the economy will grow so much? Because, as the budget says, “a comprehensive overhaul to our tax code will boost economic growth and investment”—a reference to Trump’s proposal to lower the tax rate for corporations from 35 percent to 15 percent, and to decrease the top income tax rate from 39.6 percent to 35 percent.