Trump's budget slammed by experts for severe math 'mistake'


President Donald Trump rolled out his proposed budget for the 2018 fiscal year on Tuesday, and the reviews are already pouring in.

Moving past the headline numbers — $1.7 trillion in spending cuts, massive reduction in the long-term for social safety net programs, and increased defense spending — many economists and political analysts observed that the most striking part of the Trump budget is just how many assumptions it makes.

A huge, sustained growth in GDP, a double count of benefits from tax reform, and some rosy line items are just a few of the problems with the Trump administration's opening gambit in the budget debate.

Rosy economic growth

One of the biggest assumptions the Trump budget makes is that US GDP growth will hit 3% — and stay there.

Mick Mulvaney, the director of the Office of Management and Budget, told reporters Monday that such an assumption would not be out of reach, pointing to the long-term growth rate of the American economy since World War II.

From Mulvaney's comments (emphasis added):

"That's what you can do with 3% economic growth. That's a dynamism that used to be normal in the American economy. And that's what we're trying to get back to, and that's what this budget is part and parcel of. It drives our tax reform policy, our regulatory policy, trade, energy, welfare, infrastructure, and our government's spending priorities. Everything is keyed to getting us back to 3%."

But such a sustained, 3% projection is much lower than forecasts from the Congressional Budget Office, the Federal Reserve, the International Monetary Fund, and others. Additionally, many economists shrugged off the idea.

RELATED: Conspiracy theories surrounding the Trump administration

10 PHOTOS
The conspiracy theories of President Trump and his inner circle
See Gallery
The conspiracy theories of President Trump and his inner circle

Trump and the 'birther' claim

Trump has made remarks on multiple occasions in his past suggesting former President Barack Obama "doesn't have a birth certificate." Nearing the end of his campaign trail, Trump finally admitted in September 2016 that Obama "was born in the United States."

Here is a 2011 excerpt from his statement on the conspiracy theory surrounding the "birther" claim

"He doesn't have a birth certificate, or if he does, there's something on that certificate that is very bad for him. Now, somebody told me -- and I have no idea if this is bad for him or not, but perhaps it would be -- that where it says 'religion,' it might have 'Muslim.' And if you're a Muslim, you don't change your religion, by the way."

Trump and the wiretapping claim

On March 4, the president accused former President Barack Obama of wiretapping the phones at his New York home in Trump Tower in a series of Saturday morning tweets.

"I'd bet a good lawyer could make a great case out of the fact that President Obama was tapping my phones in October, just prior to Election!," one tweet read.

FBI Director James Comey later renounced this claim at a rare public House Intelligence Committee hearing.

Trump: China created global warming

On November 6, 2012, Trump tweeted the following:

"The concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non-competitive."

The issues of global warming and climate change have long been proved valid by the science community's vast majority.

Alex Jones' Infowars, Trump tie Sen. Ted Cruz's father to Kennedy assassination

An April 2016 article in Infowars -- a site affiliated with conspiracy theorist Alex Jones -- titled "WAS CRUZ’S FATHER LINKED TO THE JFK ASSASSINATION?" makes the case that Sen. Ted Cruz's father, Rafael Cruz, was linked to Lee Harvey Oswald, the man believed to have killed John F. Kennedy.

In May 2016, Trump brought up an Enquirer story featuring Cruz's father pictured with Oswald, saying, "I mean, what was he doing — what was he doing with Lee Harvey Oswald shortly before the death? Before the shooting? It’s horrible."

He brought the storyline up again one day after accepting the Republican presidential nomination in July 2016.

Trump: Obama "founded ISIS"

Trump touted his plan to "bomb the sh*t out of ISIS" many times while on the 2016 campaign stump -- and added to his ISIS rhetoric the claim that then-President Barack Obama "founded ISIS."

Trump outlined this claim in a Florida campaign speech:

"ISIS is honoring President Obama. He’s the founder of ISIS. He founded ISIS. I would say the co-founder would be Crooked Hillary Clinton."

Trump also suggested Obama was sympathetic to terrorists in June of 2016.

Trump suggests Justice Antonin Scalia was assassinated

"It's a horrible topic," Trump said of Justice Scalia's death during a radio interview with conservative host Michael Savage. At this point, Trump was entering a space in which Savage had already called for a Warren Investigation into Scalia's death -- the same type of investigation that looked into JFK's shooting. In that context, Trump continued his remarks, saying, "But they say they found a pillow on his face, which is a pretty unusual place to find a pillow. I can’t tell you what—I can’t give you an answer. You know, usually I like to give you answers. But I literally just heard it a little while ago. It’s just starting to come out now, as you know, Michael.”

Alex Jones on Hillary Clinton's mental state

On August 4, 2016, Alex Jones' Infowars published a video titled, "The Truth About Hillary's Bizarre Behavior," in which copy reads, "...Hillary’s conduct also strongly indicates she is a sociopath who has a total lack of empathy for other people."

Jones at one point in August 2016 commented on the system in which Trump would continually pick up talking points from his show, saying, "It is surreal to talk about issues here on air, and then word-for-word hear Trump say it two days later."

Trump: 2016 election is "rigged"

Weeks before 2016 Election Day, Trump appeared on FOX News with Sean Hannity, discussing how the election is rigged because of the "1.8 million people" who vote, even though they're dead.

“You have 1.8 million people who are dead, who are registered to vote, Trump said. "And some of them absolutely vote. Now, tell me how they do that.

After he was elected president, Trump also claimed that there was "serious voter fraud" in the 2016 election, and promised a major investigation into such occurrence.

Roger Stone: Chelsea Clinton needed plastic surgery to hide identity of real father

Longtime Trump friend and political adviser Roger Stone details in his book, "The Clintons' War on Women," that Chelsea Clinton needed "four plastic surgeries" to cover up the identity of her real father, who Stone claims is former Associate Attorney General Webb Hubbell.

HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

Former Treasury Secretary Larry Summers, in a Washington Post column on Tuesday, said that the idea was a "logical error of the kind that would justify failing a student in an introductory economics course."

"Apparently, the budget forecasts that U.S. economic growth will rise to 3.0 percent because of the administration's policies — largely its tax cuts and perhaps also its regulatory policies," Summer wrote. "Fair enough if you believe in tooth fairies and ludicrous supply-side economics."

Chris Krueger of the Cowen Washington Research Group similarly dismissed the assumption.

"There is some federal budgeting wizardry and economic tomfoolery in the projections included in the budget — which assumes the AHCA is law," Krueger wrote in a note to clients on Monday. "It also assumes 3% GDP growth and that the budget will 'balance' over 10 years."

The last time the US economic growth was above 3% in a year was in 2005. The country has not had two consecutive years of GDP growth of more than 3% since 1999 and 2000, in the midst of the tech bubble. Mulvaney said annual GDP growth since 1948 has been 3.2%. But the average is 2.6% since 1980.

Other complications toward the 3% assumption include the Federal Reserve hiking interest rates, labor productivity remaining low, and structural factors such as an aging population, which all amount to headwinds toward economic growth.

Double counting tax cuts

The Trump administration says the 3% GDP growth will also help to balance the federal budget over the next 10 years. But that conflicts with statements the Trump campaign has made about its plan for tax reform.

The Trump administration has argued that its tax cut plan would be revenue neutral because of the resulting economic growth. It has also argued that the economic growth from tax cuts would help balance the budget.

Put another way, say all current taxes and outlays are set at a baseline of $0. Trump's tax cuts, the administration says, would nominally decrease revenue and bring the deficit from the baseline to -$100. Based on the White House's statements after the tax plan was released, they would argue the growth from the tax cuts would get the US back to $0.

The administration is saying the tax cuts will not only pay for themselves, but also earn the country enough to make up the deficit. Essentially, what they billed as a revenue-neutral tax plan will now evidently be revenue positive.

As Summers put it this math does not work "in a world of logic."

"This is a mistake no serious business person would make," Summers said. "It appears to be the most egregious accounting error in a presidential budget in the nearly 40 years I have been tracking them."

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, also took issue with the apparent double-counting in a statement Monday.

"The budget also uses the entirety of the dynamic revenue from growth to pay down the debt – a move that we support but that is inconsistent with their past statements that economic growth would help pay for tax reform," MacGuineas said. "The same money cannot be used twice."

NOW WATCH: China built a $350 million bridge that ends in a dirt field in North Korea

See Also:

SEE ALSO: Trump's budget calls for staggering cuts to Medicaid, food stamps, and many other domestic programs

Read Full Story

Markets

DJIA 21,394.76 -2.53 -0.01%
NASDAQ 6,265.25 28.56 0.46%
S&P 500 2,438.30 3.80 0.16%
NIKKEI 225 20,153.35 20.68 0.10%
HANG SENG 25,871.89 201.84 0.79%
DAX 12,829.63 96.22 0.76%
USD (per EUR) 1.12 0.00 -0.19%
USD (per CHF) 0.97 0.00 0.41%
JPY (per USD) 111.68 0.44 0.40%
GBP (per USD) 1.27 0.00 -0.24%

Can't get enough business news?

Sign up for Finance Report by AOL and get everything from retailer news to the latest IPOs delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.