President Trump is no dummy. He chose to exchange gifts with the pope in Rome while leaving his budget director and Treasury secretary in Washington to respond to critics of his budget. Let them take the heat while he takes the bows for a successful trip.
The pontiff, who speaks for the poor, had not seen the Trump budget, which takes a meat axe to programs that are intended to benefit the less well-off. Had he, only heaven knows what he would have told the president. Not that there would have been a need for papal concern. Past budgets were often deemed by Congress to be DOA, dead on arrival. This one, says Representative Don Young, the Republican from Alaska, “was dead before the ink was dry.”
Which proves that Trump is not only not a dummy—he’s lucky, too. Because if this budget were adopted he would likely lose support from the voters it hurts, including the 23 million the Congressional Budget Office estimates will lose health insurance coverage. Fear not. As Senate majority leader Mitch O’Connell so diplomatically put it, “We’ll be taking into account what the president recommended. They will not be determinative.” Better the budget be DOA in Congress, reasons Trump, than he be DOA in the 2020 election.
A government budget contains numbers—lots of numbers. Some are unrealistic. Some are merely fanciful. Some might be erroneous. No matter. The numbers are less important than the economic and social priorities they reflect, for those priorities undergird the position the Trump team will take in negotiations with Congress to reach a final deal on the numbers, and will likely bear little relationship to those contained in Trump’s grandly titled “New Foundation For American Greatness.”
And during those negotiations, the positions parties take will determine the answers to several questions:
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Which generation is the favored generation? The balance of spending and tax revenues—the size of the deficit—will tell whether the drafters favor the present, or future generations, the old, or the young. The larger the deficit, the more willing the budget-makers are to allow the current generation to party now, and leave the bills for younger folks—their children and grandchildren—to honor, or dishonor by allowing run-away inflation to wipe out the value of their inherited IOUs, along with the pensions of their profligate fathers and grandfathers. Intergenerational equity is no easy thing to compute.
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What is the drafters’ theory about how a modern economy works? If they believe growth is driven by relatively wealthy people investing in new plants and taking risks, then they will reduce their taxes to encourage them to invest more so that the benefits will, well, trickle down to others (some prefer “cascade” to “trickle”). If, on the other hand, the drafters believe that growth is driven by increased consumer spending, then they will raise taxes on the rich to redistribute income to poorer families who are more likely to spend the cash than the sated rich—and therefore to propel the economy onto a higher growth path.
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What is the effect of entitlement programs? If you believe that dependency saps the incentive of the unemployed to give up their video games and get off the couch, then you should reduce these programs to push people into the labor force and remove the shortages that are constraining growth. If, on the other hand, you believe they improve the health and skills of the poor—and their ability to return to work—or are, on their own, simply the decent thing for a capitalist system, then you should double down on them.
Nancy Pelosi, the California congresswoman who leads the Democratic minority in the House, says that because of Trump’s priorities and Republicans’ cuts in healthcare spending, “People will die.” She is right. The only question facing budget-makers, who must decide how to deploy society’s limited resources, is “Who will die?” The reductions in healthcare spending proposed in this budget and the healthcare plan before Congress come to $800 billion over ten years.
That’s enough to save millions of lives by buying and distributing around the world 800 THAAD missile defense systems, such as those which protect South Korea from North Korea’s missiles. Or to expand our military capability to eliminate the ISIS “losers” (Trump’s preferred descriptive, the most demeaning he can conjure) who slaughter innocents across the globe.
All budgetary decisions are a lesson in opportunity costs. Here is an incomplete tally of the proposed cuts over the next ten years: Medicaid, the health program for the poor, $800 billion; food stamps, $193 billion; student loans, $143 billion; disability payments, $72 billion; farm subsidies, $38 billion. The arts are to be reduced to seeking support in the private sector, so out goes funding for left-ish National Public Radio and the National Endowment for the Arts. Some foreign military grants would be converted to loans.
The budget for a modern welfare state is really merely a system of transfer payments. Except that the phrase “transfer payments” has evolved to be understood as “entitlements.” Which has created a predictable, bipartisan reaction. “Deep and harmful to my district” (that includes poverty-stricken Appalachia) says Hal Rogers, a Kentucky Republican. It’s “the budget you write if you think working families have it too easy,” says Ron Wyden, a Democratic senator from Oregon.
Because Social Security and Medicare benefits for retirees are untouched, the total effect of the budget is to engineer a shift of resources from the poor and semi-poor to older Americans, whose benefits are geared to their ages, not their incomes.
Tax cuts will follow. Treasury secretary Steve Mnuchin seems to be assuming that by removing growth-stifling regulations and disincentives to work, he can get the economy to grow at a 3 percent annual rate. As for tax cuts, they will, he seems to be assuming, pay for themselves: The revenue lost will be made up by higher tax receipts.
But the assumed 3 percent growth rate is far above the approximately 2 percent assumed by both the CBO and the Federal Reserve economists. And even if this rate is attained, it is unlikely to generate the revenues on which Mnuchin is counting. William Gale, the co-director of the nonpartisan Urban-Brookings Tax Policy Center, and former adviser to George H.W. Bush, says, “The assumed effects on growth are just huge and unwarranted.” Most economists agree that tax cuts will produce revenues equal to somewhere between 7 percent and 25 percent of the foregone revenue.
Trump always says his first offer is not his last. That’s a good thing in the case of this budget.
