Yes, Virginia, You Can Cut Taxes And Deficits At The Same Time — Just Ask The CBO

[SirLinksALot]

SOURCE: INVESTORS BUSINESS DAILY

URL: http://www.investors.com/politics/editorials/yes-virginia-you-can-cut-taxes-and-deficits-at-the-same-time-just-ask-the-cbo/


Budget: President Trump's budget plan doesn't come close to balancing the books, according to the Congressional Budget Office. But it does cut the deficit in half, even while reducing taxes.

The CBO's analysis of Trump's budget says that it would, if enacted, produce a deficit of $720 billion in 2027, not the small surplus Trump claimed.

That's what made the headlines.

But as if often the case, it's what didn't make the headlines — or get pundit tongues wagging — that matters.

In this case, it's the fact that almost the entire difference between the CBO's and Trump's view is the result of different economic forecasts.

According to the CBO, Trump's budget would cut spending by $4 trillion over the next decade, and cut taxes by $900 billion. That's roughly in line with what Trump's own budget projected.

However, the CBO assumes that real annual GDP growth will top out at 1.9% in 2020 and remain there through 2027, while Trump's budget has it reaching 3% that year, and then staying there for the next six years.

As a result, the CBO projects that revenues will come in $3.6 trillion lower than Trump's projections, which is more than equal to the gap in deficit forecasts.

Even so, the CBO says that Trump's budget would cut the projected "baseline" deficit in half by 2027, knocking it down to 2.6% of GDP, instead of 5.2%.

That's not zero, but it does mean that, even with the CBO's crabbed economic forecast, Trump's budget would produce a deficit that, as a share of GDP, would be right around those during the 40 years before President Tax-and-Spend-With-A-Vengeance Obama came into office.

So who's closer to being right about the country's economic future — Trump or the CBO?

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