The following article by Binyamin Applebaum was posted on the New York Times website May 23, 2017:
WASHINGTON — 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.”
One example of the budget-ledger legerdemain: Mr. Trump has pledged to end estate taxation. His budget, however, projects that the government will collect more than $300 billion in estate taxes over the next decade. Indeed, the Trump administration projects higher estate tax revenue than the Obama administration did because it expects faster economic growth.
Mr. Trump, in other words, is proposing to balance the federal budget in part by simultaneously increasing estate taxation and eliminating estate taxation.
Peter R. Orszag, the director of the Office of Management and Budget during President Barack Obama’s first term, said the treatment of taxation was part of a broader failure by the Trump administration to present a credible plan for managing the budget.
The Trump administration, for its part, said the focus on details was misplaced. The Office of Management and Budget said in a statement that the president’s tax plan would not increase the deficit because the cost of tax cuts would be offset by faster growth and by changes that increase revenue, like limiting deductions.“It is not hard to write down a series of numbers on a paper and say: ‘Tada! I balanced the budget!’” Mr. Orszag said. “That is a much different process than having a credible plan for how that could be achieved. And they have not done that.”
In effect, it is saying: The details might be wrong, but the bottom line won’t change. The government will simply end up with a smaller share of a much larger pie. And that revenue, combined with spending cuts, will produce a balanced budget by 2027.
But Steven Mnuchin, the Treasury secretary, offered a different explanation. “We felt it was premature to put in any changes to the budget as a result of taxes, since we’re not far enough along to estimate what that impact will be,” Mr. Mnuchin said on Tuesday at a “fiscal summit” meeting sponsored by the Peter G. Peterson Foundation.
The budget’s presentation of the benefits of the administration’s economic policies also raised questions. White House officials said that tax cuts and other changes, like reductions in regulation, would push annual economic growth to 3 percent by 2020, well above the 2 percent annual average since the recession. The budget projects that the increase in economic growth will produce $2.1 trillion in additional federal revenue.
The Trump administration appears to be counting this windfall twice. It needs the money to offset the cost of the tax cuts, but in the budget, the $2.1 trillion is also recorded as a separate line item above and beyond the steady growth of tax revenue.
“The same money cannot be used twice,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement criticizing the administration’s math.
The budget office insisted in an email that the $2.1 trillion was in addition to the revenue necessary to offset the cost of the tax cuts. The administration, in other words, said that it had previously underestimated the benefits of its own plans.
But Marc Goldwein, a senior policy director at the Committee for a Responsible Federal Budget, said the budget itself showed that this could not be true.
The White House, in a different part of the documents published Tuesday, projected that the increase in growth would produce total revenue of about $2.1 trillion.
The budget itself says that Mr. Trump will not achieve his stated goal of a balanced budget.
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