It looks like Trump want to explode the deficit

kamikaze483 said:

Ok. So for the purpose of discussion lets use your figures reportedly from the Office of Management and Budget. To clear the air a bit, I was not a Trump supporter though I did vote for him- so I do look at his stuff critically and am not a "Trumper."

And to clarify further, obviously everything we discuss about what Trump and a GOP Congress will do and what results those actions might have is totally theoretical.

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Yep. We are still talking about proposals.

Point 1: I expect Trump to view the government as a business. He will want the country to "make a profit," which in the world of government equates to receipts in excess of expenditures. I expect that he also has no notion that this can be achieved in 1 year or two years. So, for Trump, a budget surplus that can be applied to reduce the national debt will be the medium range goal. In the meantime, a businessman would establish goal markers each year that would put the organization on track to achieve the desired medium and longer range results. Those goal markers would, in the short run, be progressive reductions in deficit spending. These are not facts, but they are how I perceive that Trump will likely be looking at the country's finances.

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I'd be here all day if I have to explain how a government is not like a business, and never should be, and how that would be an utter disaster.

But, for the moment, let's accept that Trump wants to run a surplus.

In that case, he is doing the exact opposite of what will produce that result. By cutting taxes, he will eviscerate revenues -- hence the Trump Tax Gap. He's explicitly said he wants to increase defense spending and spend on infrastructure, which makes the hole bigger. If he cuts Social Security or Medicare or VA spending for 2017, he and every Republican who supported him will be thrown out so fast that Trump Tower itself will spin for a week.

He absolutely cannot cut interest spending, as that would be putting the US into default. Doing so would be a disaster that not only would increase interest rates (thus increasing the debt far more than he'd save with a default), it would basically cause the global economy to melt down. Seriously.

If he didn't cut taxes at all, he'd still have to eliminate everything else to get any sort of surplus. No FAA, no highway spending at all, no infrastructure spending, no ICE / border control, no food inspections, no more FCC, no one watching nuclear power plants, no one fixing the grid, no one managing federal water supplies, zero federal education spending, every single national park closed.... That is not happening.

By the way, this is pretty much what Kansas has done since around 2011. Under the spell of Laffer's supply side voodoo economics, they slashed taxes in an attempt to draw businesses into the state. Instead, what happened is that local businesses reorganized to take advantage of the tax cuts, few businesses moved in, there was minimal growth, and it's triggered years of revenue shortfalls and fiscal crises for the state. For some inexplicable reason they raised sales taxes, which is a regressive tax that occasionally drives Kansans across the border to shop. Kansas wasn't spending much to begin with, so they've had to raid transportation funds, cut education spending, delayed state pension fund payments, and sell off the state's tobacco settlement for $158 million.

I'm pretty sure they've had to cut over $1 billion in spending since implementing the plan. And the short-term fixes are not working, because they keep having annual shortfalls.

Here are a few of the assumptions of the authors of the report, quoted from the report itself....

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Yes, I'm aware of that assumption. That's why they included the "dynamic scoring," which is a highly optimistic scenario in which Trump's tax cut sparks massive growth.

And even in that scenario, his plan results in anywhere from $3 billion to $4 billion in reduced tax revenues over 10 years.

As the old saying goes: You can't cut your way to growth.

He wants a $1 trillion infrastructure plan and completely revamp our nuclear arsenal and probably add to it.

Real deficit hawk he is.

Visbek said:

Yep. We are still talking about proposals.



I'd be here all day if I have to explain how a government is not like a business, and never should be, and how that would be an utter disaster.

But, for the moment, let's accept that Trump wants to run a surplus.

In that case, he is doing the exact opposite of what will produce that result. By cutting taxes, he will eviscerate revenues -- hence the Trump Tax Gap. He's explicitly said he wants to increase defense spending and spend on infrastructure, which makes the hole bigger. If he cuts Social Security or Medicare or VA spending for 2017, he and every Republican who supported him will be thrown out so fast that Trump Tower itself will spin for a week.

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Eviscerate revenues? My earlier point was that, YES- assuming there are no macroeconomic changes (i.e. regulatory reduction to spur growth... laffer curve effect, etc.) that would actually RAISE GDP, producing additional revenue from the tax base even in the face of lower percentage tax rates on individuals and businesses) and also assuming that there will be no spending reductions along with the tax cuts, the revenue to the government would be significantly reduced. I do not think that those assumptions are appropriate ones in this case. But I can't prove that because we really don't know what he is actually going to do.

Let's come back later to Medicare, SS and VA. You described these earlier as "untouchables." They aren't. These are the true entitlements and the countries obligations have to be met, but saying that they are untouchable suggests that they are efficient and effective and streamline and the expenses can't be significantly reduced. There is a TON that can be done here to save taxpayer dollars as, per your pie chart, this is the largest expense item in the budget

Visbek said:

He absolutely cannot cut interest spending, as that would be putting the US into default. Doing so would be a disaster that not only would increase interest rates (thus increasing the debt far more than he'd save with a default), it would basically cause the global economy to melt down. Seriously.

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Here I agree with you 100%

Visbek said:

If he didn't cut taxes at all, he'd still have to eliminate everything else to get any sort of surplus. No FAA, no highway spending at all, no infrastructure spending, no ICE / border control... no one fixing the grid, no one managing federal water supplies, zero federal education spending, every single national park closed.... That is not happening.

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The problem with this argument is that you ignore two things. 1) The inefficiencies and cost savings opportunities that are available with the entitlements which represents 28% of the total budget and 2) that revenue would remain static. This goes by to the dynamic effect macroeconomics that would occur based on regulatory policy, the laffer curve, and lots of other things. The GDP MIGHT grow even with the tax cuts, depending on the macroeconomic effects of Trump's policies.

Visbek said:

By the way, this is pretty much what Kansas has done since around 2011. ....

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Here we may not ever agree, because I do believe that the Laffer curve has tremendous validity under certain economic circumstances and I venture to guess that your economic beliefs are more Keynesian, which I discount a lot of. I don't think it works the way a lot of people believe that it does. Lets look at Georgia, where I live. Perhaps that plan didn't work in Kansas, but it has worked here. There are HUGE tax breaks in GA for the film industry. We now house the largest movie studio outside of Hollywood and the economic development and the increase in the tax base with all this additional industry has been huge.

Georgia film industry expert to speak at Warner Robins Convention and Visitors Bureau annual meeting | The Telegraph

Visbek said:

Yes, I'm aware of that assumption. That's why they included the "dynamic scoring," which is a highly optimistic scenario in which Trump's tax cut sparks massive growth.

And even in that scenario, his plan results in anywhere from $3 billion to $4 billion in reduced tax revenues over 10 years.

As the old saying goes: You can't cut your way to growth.

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That old saying doesn't ring true with me, though many people believe that. That is Keynesian economics. I do believe in demand side economics. I believe in having a function (in our case the FED) to control the flow of money into and out of the market, but I don't believe that infusions directly from the government have a greater effect than removing barriers to growth from businesses, which is what you would probably refer to as trickle down. These are fundamental differences on which we are never likely to agree.

Sietske22 said:

He wants a $1 trillion infrastructure plan and completely revamp our nuclear arsenal and probably add to it.

Real deficit hawk he is.

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Interesting post. What actually is the infrastructure Trump wants to invest in? Here is a quote from Trump's website regarding his infrastructure plans:

Create thousands of new jobs in construction, steel manufacturing, and other sectors to build the transportation, water, telecommunications and energy infrastructure needed to enable new economic development in the U.S., all of which will generate new tax revenues.

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A targeted and smart infrastructure plan including those items (especially transportation and airport security improvements) are likely to pay for themselves through the economic development opportunities created by improved infrastructure. These improvements may make doing business easier and faster, allowing companies to develop and expand and therefore increasing the tax base over and above the trillion dollars spent on it. (One trillion over 10 years by the way). That's 1 trillion in new spending. The national debt when Bush left office was 10 trillion. Under Obama, that has increased to 19 million. And it is not clear if this 100 billion per year would be deficit spending. If they turn out to be revenue neutral, there is no impact on the debt.

JohnfrmClevelan said:

You're missing the part where you explain why increasing the deficit to spend on infrastructure will harm the economy. As always.

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It is pretty funny how the party of larger deficits tries to stand for conservatism.

kamikaze483 said:

Eviscerate revenues?

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Yep.

Up to $6 trillion static, up to $4 trillion dynamic. That's not chump change.

Let's come back later to Medicare, SS and VA. You described these earlier as "untouchables." They aren't.

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Trump repeatedly promised during the campaign not to cut Social Security and Medicare. 56 million Americans currently collect it, and that cohort voted heavily for him. If he goes back on that, they'll run him out of town on a rail.

These are the true entitlements and the countries obligations have to be met, but saying that they are untouchable suggests that they are efficient and effective and streamline and the expenses can't be significantly reduced.

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Social Security spends less than 1% on administration. There is nothing to cut except benefits.

There aren't many options to cut Medicare costs. They can't cut doctor and hospital payments much without losing more doctors and support. Attacking fraud requires spending money, and stories about legit recipients losing benefits. They could reduce pharmaceutical costs, but that's not much, and would require Republicans to repeal part of Bush's Medicare Part D law which... Republicans put into place. In fact, one of the best ways to keep costs down is with, wait for it... the ACA. Which is going bye-bye. Eventually. In theory.

You think they can cut VA spending? No.

Again, they cannot cut interest payments without blowing up the world economy.

Trump will not cut Defense.

So yes, those components are basically untouchable.

The problem with this argument is that you ignore... that revenue would remain static.

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Incorrect. Again, with dynamic scoring, the revenue reductions are still $3 billion to $4 billion over 10 years.

That said, dynamic scoring is highly problematic. It relies on unproven assumptions that are often inaccurate. They promise growth that doesn't always happen. They license bigger tax cuts. Empirical evidence is lacking. It's not the strongest nail upon which to hang one's hat, let alone gamble the fiscal health of the federal government.

Lets look at Georgia, where I live....

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Georgia didn't pass a cut on existing revenues. They attracted businesses that were operating in California and Vancouver and New York. They were giving up tax revenue, rather than cutting existing revenue. Even so, Georgia missed out on $250 million in taxes by giving the film industry a 30% break.

That won't work on a national scale, because we can't possibly cut taxes enough to compete with labor that is 80% lower than in the US.

Meanwhile, the movie industry claims that brought $4 billion in wages to Georgia. With a 6% income tax, that's around $240 million in revenues -- and this is not a zero-sum game, where those workers could not possibly have gotten other jobs. So basically, GA broke even. It's still worth it for Georgia to continue, but it's very different than whacking a huge chunk off of existing revenues.

GA's movie tax break is fundamentally different than Kansas' across-the-board tax cuts. They're not even close.

Laffer says it will take 10 years before Kansas theoretically goes into the black (| The Kansas City Star). Oddly enough, he didn't say how many more years it would take Kansas to recoup the billions in lost tax revenue during that 10 year period.

But Laffer's data doesn't support supply side economics. His big study (which is, of course, disputed) is that states without income taxes do better on a few economic measures than those with high income taxes. Nothing about it proves that when a state slashes its taxes, it spurs so much growth that it offsets the lost revenue.

Oh, and... Kansas' population growth rate hasn't changed; unemployment didn't drop at a faster rate; its economic growth rate has flatlined; per capita GDP growth has dropped, while its neighbors went up; and of course, tax revenues are crashing.

This has nothing to do with Keynesian economics. The overwhelming majority of economists understand that Laffer is wrong. Even Trump's own pet economist gets it, as he claimed we could make up the shortfall by waging a trade war on China. In his paper, he takes for granted the lowest estimate available, which is Tax Foundation's loss of $2.6 trillion.
Donald Trump?s Economic Plan, Up Close, Doesn?t Add Up - Real Time Economics - WSJ

Unless tax rates are so incredibly high that people are committing rampant tax fraud, you cannot increase tax revenues by cutting tax rates.

Utility Man said:

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:lamo

:thumbs:

kamikaze483 said:

Ok. So for the purpose of discussion lets use your figures reportedly from the Office of Management and Budget. To clear the air a bit, I was not a Trump supporter though I did vote for him- so I do look at his stuff critically and am not a "Trumper."

And to clarify further, obviously everything we discuss about what Trump and a GOP Congress will do and what results those actions might have is totally theoretical.

Point 1: I expect Trump to view the government as a business. He will want the country to "make a profit," which in the world of government equates to receipts in excess of expenditures. I expect that he also has no notion that this can be achieved in 1 year or two years. So, for Trump, a budget surplus that can be applied to reduce the national debt will be the medium range goal. In the meantime, a businessman would establish goal markers each year that would put the organization on track to achieve the desired medium and longer range results. Those goal markers would, in the short run, be progressive reductions in deficit spending. These are not facts, but they are how I perceive that Trump will likely be looking at the country's finances.

Point 2: So if those are the goals, how would a businessman approach this? He would have a two fold approach: 1) increase revenue and 2) decrease expenditures, the combined effect of which, in a business, would widen the profit margin.

Your first point was that Trump's plan would reduce revenue by $440B at minimum. I opened your article from NPR and saw that the actual source of the $5.9 trillion dollar number was research done by The Tax Foundation. Here is the actual report.

Details and Analysis of the Donald Trump Tax Reform Plan, September 2016 | Tax Foundation

Here are a few of the assumptions of the authors of the report, quoted from the report itself:



Therefore, as to your first point about Trump's tax plan, there are a LOT of ways that Trump could offset this 440 Billion-6 Trillion projected reduction in revenue.

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To the bolded:

Point 1: Besides the absurdity of running government as a business (which makes as much sense as running business as a government), all I see here is theoretical generalities. So what makes this different than what the President and Congress attempt to do every year? They attempt to balance revenues and expenditures, hopefully to not run a deficit. I see nothing different in what you've generalized. Except for ...

Point 2: But what you suppose is exactly the opposite of what Trump proposes! He's cutting revenues via tax cuts, and initiating massive infrastructure spending! Who's going to pay for these tax cuts & spending? :doh


And I notice along with all the theoretical generalities your theorizing, you rely heavily on the Laffer Curve. It's a highly disputed majority debunked theory which has never proven itself in the U.S. economy. After the Reaganomics tax-cuts of the 80's, revenues fell as a percentage of GDP and the deficit skyrocketed (forcing him to rollback his tax cuts substantially)! Under the Bush tax-cots of the 00's, the deficits again bloomed, wiping-out the Clinton tax surpluses! So this theory clearly has not worked over the broken periods of the 30 years it's been attempted. But we do know under Clinton's 90's tax increase the budget produced surpluses! Surpluses!

Even if Laffer were found to work (I'm not proposing it does), how do you know what side of the curve we're on? Seriously. How do you know? Perhaps - as under Clinton - it shows we need to increase taxation? This would seem to be the empirical case, if Laffer is to be believed! I'd like to hear an argument contrary, that fits the empirical data from the last 30 years.

Deficits will stop mattering to GOPosters in Feb. 2017.

Just as they started mattering in Feb. 2009 .

Chomsky said:

Exactly!

Rates are already bumping-up w/o any external influence.

And now he wants tariffs!

But just wondering, Jo: How would you describe the current state of the U.S. economy?

(I put down my thoughts in post #7)

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No really deep analysis just now. What is certainly the case is that the economy is chugging along quite well for such a large country and considering the fact that the global economy has been slow.

On the other side there seems to me a bit of reason for concern. The Fed has been very accommodating and the fiscal deficit has remained a definite accelerating factor. Additionally the stock prices have been very strong and have given further strong impulses. This puts the growth in less impressive relief and might even be considered disappointing all things considered.

That is not really disturbing, however. It is backward looking. Some of those factors are alarming, because they point into the future. The debt is large enough that an increase in rates will weigh heavily on the costs to the budget. The size of the debt combined with an already largish deficit mean that the government does not have much leeway. The same is true of the Fed. It has all the instruments firing and is just now reducing its over extension. Neither has much powder dry, if some shock hits us, while the Dollar is strengthening and the stock market has had a run that some might characterize as irrationally exuberant. The coming two years could be wonderful. But the risks are quite sizable and we have frittered away a lot of substance we might need.

Kushinator said:

Why or how do short rates go back to three/four percent?

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The weakness in the EU protects us somewhat, I will admit. But asset prices are a little concerning.

KLATTU said:

So he's talking about cutting taxes AND a big infrastructure project.
Now that probably won't come to pass but that sounds incredibly reckless.

I know there is talk about dismantling the ACA but that isn't costing much right now

I haven't seen any evidence about cuts anywhere else. What am I missing?
Thankfully Mexico will pay for that wall or it would be even worse!

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And don't forget lots and lots more nukes - and those things are not exactly found at the Dollar Store.

Utility Man said:

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Thanks for that great blast from the past. Lets hope FDR finds a way to get back here soon. He led the country against fascism and defeated authoritarian tyrants with no moral ethics or principles - sounds like good skills to have now.

KLATTU said:

So he's talking about cutting taxes AND a big infrastructure project.
Now that probably won't come to pass but that sounds incredibly reckless.

I know there is talk about dismantling the ACA but that isn't costing much right now

I haven't seen any evidence about cuts anywhere else. What am I missing?
Thankfully Mexico will pay for that wall or it would be even worse!

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You realize that tax cuts often result in increased revenue, right?

Incisor said:

No they don't, because spending reduction results in less spending, which means less revenue.

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Ummmm.....huh?

Incisor said:

Tax cuts, while principally designed to benefit the wealthy, also have the secondary effect of creating budget deficits which are then used by Conservatives as an excuse to cut spending they otherwise would have no chance of cutting. Those cuts are almost always operational, causing those programs to fail. Then Conservatives point to the failures of those programs as an excuse to sell them off to private interests who profit off them.

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"Spending cuts" are never actually "cuts", but reductions of the projected increase in spending. In other words, "spending cuts" are still increased spending.

I'd just like to hear some workable suggestions from the economic brain trust we appear to have in this Forum that will both reduce government debt while simultaneously stimulating the economy.

By stimulate, I don't mean just make things more profitable for the top 1% - 3%, but also increase American jobs and demonstrate that "trickle-down" ideology.

It's easy to nay-say what won't work.

How about your comprehensive plans for what will work?

KLATTU said:

I know there is talk about dismantling the ACA but that isn't costing much right now
What am I missing?

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I isolated this part of the comments in your OP.

Isn't costing much right now?

This Is How Much Obamacare Will Cost Taxpayers in 2016


I don't know what your measure is for "costing much right now", but $110 billion and growing fit's in my category of costing much right now.

ocean515 said:

I isolated this part of the comments in your OP.

Isn't costing much right now?

This Is How Much Obamacare Will Cost Taxpayers in 2016

New projections from the Congressional Budget Office, however, anticipate that the federal government will need to spend more on Obamacare than previously thought.

The non-partisan office estimates that the program will cost the federal government $1.34 trillion over the next decade, an increase of $136 billion from the CBO’s predictions in 2015. In 2016 alone, Obamacare will cost a total of $110 billion.​

I don't know what your measure is for "costing much right now", but $110 billion and growing fit's in my category of costing much right now.

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Why are you so worried about Obamacare? I thought Trump was going to repeal it on January 21st.

kamikaze483 said:

I think you are missing the following:

1) The Department of Energy submitted a budget request for $32.5 billion dollars(https://energy.gov/sites/prod/files/2016/02/f29/FY2017BudgetinBrief_0.pdf)

Trump has appointed Rick Perry who wishes to significantly dismantle the Department through consolidation of the critical components with other agencies and eliminating the rest. There's a lot of money right there.

2) The request from the Department of Education was 69.4 BILLION DOLLARS. (http://www2.ed.gov/about/overview/budget/budget17/summary/17summary.pdf Betsy DeVos, the appointee to that department, supports eliminating the education department completely in favor of block grants provided to states, the administration of which would be consolidated with another department. There's some more money.

3) Scott Pruitt has been assigned to the EPA, a person who has advocated the elimination of that department. The budget there is 8.267 billion (https://www.epa.gov/sites/production/files/2016-02/documents/fy17-congressional-justification.pdf)

4) Trump's tax plan: Simplify the tax code to four brackets and eliminate deductions. This is the closest plan we have see to a flat tax, wherein each taxpayer simply pays the tax associated with their level of income, without all the deductions that complicate the process. This plan would do two things: a) it would offset tax cuts with fewer deductions, making it revenue neutral and b) it would provide the opportunity to make vast reductions at the IRS freeing up even more money in the budget.

These were just a few of the things you are missing.

Many on the left think the only way to shrink a deficit is to raise taxes. Spending reductions have the same effect.

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I fully expect Rick Perry's feelings about the Department of Energy to take a 180 degree turn.

ocean515 said:

Isn't costing much right now?

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It's well below what was advertised in 2009/10. That continues to be the case in the CBO document you cite.

In the years where the original score overlaps with the document you posted:

Gross Cost of Coverage Provisions, in Billions

So yes, it's costing substantially less than we were told it would.

KLATTU said:

So he's talking about cutting taxes AND a big infrastructure project.
Now that probably won't come to pass but that sounds incredibly reckless.

I know there is talk about dismantling the ACA but that isn't costing much right now

I haven't seen any evidence about cuts anywhere else. What am I missing?
Thankfully Mexico will pay for that wall or it would be even worse!

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We need a new tax code.

as for the other part he wants to divert funds from what we give the UN in climate change and put it towards
the infrastructure project.

The other part is he is wanting to hand out 137b dollars over 10 years to private investors who want to help with the project.
sounds very smart to me.

rocket88 said:

Why are you so worried about Obamacare? I thought Trump was going to repeal it on January 21st.

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I was only taking exception to a comment about ACA not costing much.

Was that confusing to you?

Greenbeard said:

It's well below what was advertised in 2009/10. That continues to be the case in the CBO document you cite.

In the years where the original score overlaps with the document you posted:

Gross Cost of Coverage Provisions, in Billions

	2016​	2017​	2018​	2019​
2010 projections	132​	154​	164​	172​
2016 projections	110​	113​	119​	123​
Change relative to expectations	-22 (-17%)​	-41 (-27%)​	-45 (-27%)​	-49 (-28%)​

So yes, it's costing substantially less than we were told it would.

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Can you explain the wild difference between the report I provided a link to, and that which you are claiming?

The report you linked included this statement:


How Much Are the Federal Subsidies, Taxes, and Penalties Associated With
Health Insurance?

CBO and JCT currently estimate that in 2016 the federal subsidies, taxes, and penalties associated with health insurance coverage will result in a net subsidy from the federal government of $660 billion, or 3.6 percent of gross domestic product (GDP). That amount is projected to rise at an average annual rate of 5.4 percent, reaching $1.1 trillion (or 4.1 percent of GDP) in 2026. For the entire 2017–2026 period, the projected net subsidy is $8.9 trillion.