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It looks like Trump want to explode the deficit

KLATTU

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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!
 
We have to wait and see if Mulvaney will have any real power. Either Trump just doesn't listen to him or that infrastructure idea is going down the drain.
 
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!

He would find out how reckless it is, if short rates were to go back to three or four percent.
 
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!

You're missing the part where you explain why increasing the deficit to spend on infrastructure will harm the economy. As always.
 
I haven't seen any evidence about cuts anywhere else. What am I missing?

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

No they don't, because spending reduction results in less spending, which means less revenue.
 
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!
From the getgo during the campaign, I knew his budget didn't add up. No way.

You can't cut revenues + increase expenditures, and balance an already upside-down budget. His claim is that the added deficits this will cause will be compensated by the revenues added by a further stimulated economy. At the least, this is T.B.D. But, I'm not sanguine about this at all. Because if so, then with 3+ decades of trickle-down Reaganomic tax cuts at the top - we should be awash in jobs & revenue! And it ain't so. It ain't so, because employment is a demand function, and all the tax cutting in the world will not increase employment unless there is increased demand for labor!

So now, he's talking about a 5% import tariff. Sure that may bring in additional revenue, if he can get it past the GOP controlled Congress and Chamber of Commerce (highly doubtable). Perhaps he can do it with an Executice Order, but at what cost? Inflation at the best, and a trade war at the worst?

Despite all the naysayers, this Obama economy has been slowly chugging along with no drama for years. Low inflation, low interest rates, falling unemployment, a recently increasing labor force participation, slowly rising wages, recovered housing market, and moderate sustained growth. It's been fine, as far as I can see. And last quarter was pretty warm too, with 3.5% growth rate leading to a Fed tightening.

With the rising wages, falling unemployment, increased workforce participation, and especially the increasing growth rate and subsequent fed tightening, I'm actually becoming slightly concerned with the economy becoming inflated. We're a seem to be a bit away from that, but everywhere I go I see help-wanted signs (which of course is good, unless it leads to inflation).

So my main concern is that Trump will upset the economy. It's been sustained, and moderate. I don't want to see it injured by weakening, or conversely put into an inflationary situation.

And tariffs? Argh! Scares the hell out of me, with nearly everything we have being imported from China. They hold all our dollars too, and if they start getting nervous "good bye strong dollar and hello inflation"!

TL;DR His budget don't add up - the economy's now reasonable enough & improving, I hope he don't wreck it!
 
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.

re: #'s 1 - 4.

Theory & campaign rhetoric. The actual occurrence (and proposed savings) is T.B.D.

(I do believe some form of #4 may occur, but again its efficacy - like the above - is T.B.D,)
 
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?
Not much. Nothing that makes his calculations work any better.

1) Cutting taxes can increase growth -- depending on how the cuts are designed. However, they will not be able to generate anywhere near enough of an increase in revenues to offset the lost tax revenues.

2) Trump wants to push some of the costs of the infrastructure plan to the private sector -- e.g. you rebuild it, you bought it. The problem there is that most of the infrastructure we need is either way too expensive with too little return for the private sector (e.g. the NYC Gateway Project will probably cost $20 billion) or is projects that can't make any money for those private investors (e.g. that small bridge over a stream that needs to be replaced)

3) Republicans seem to not care about deficits... as long as they have political power, and get to cut taxes for the wealthy.

4) Trump claims that by starting trade wars with our trading partners, he will fix the trade balance and generate enough economic activity to offset the lost revenue. I've read the report, and the guy who wrote it is pretty much bat-**** insane.

5) Conservative / Republican-run states like Kansas have tried this approach, slashing taxes and insisting the growth will eventually increase tax revenues. They're on year 5 now, and all it's done is create 5 years of fiscal crises for the state. (They are facing another shockig $346 billion shortfall: Kansas faces $346 budget deficit in current fiscal year | The Kansas City Star) They can't borrow, and the state spends very little, so they are raiding transportation taxes and slashing education budgets. It's a disaster.


Thankfully Mexico will pay for that wall or it would be even worse!
I hope that's a joke, because Mexico will not pay one thin dime for new fencing on the border.
 
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He would find out how reckless it is, if short rates were to go back to three or four percent.
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)
 
You're missing the part where you explain why increasing the deficit to spend on infrastructure will harm the economy. As always.

My post was only about the deficit. Whether or not said deficit spending would help or hurt the economy depends on my factors. There is no one answer.
 
re: #'s 1 - 4.

Theory & campaign rhetoric. The actual occurrence (and proposed savings) is T.B.D.

(I do believe some form of #4 may occur, but again its efficacy - like the above - is T.B.D,)

The whole post is about campaign rhetoric, isn't it?
 
The whole post is about campaign rhetoric, isn't it?
Essentially.

That's not to say some won't be implemented.

It's all very T.B.D. though, and not sufficient IMO to make a strong economic argument.

But I suppose it's O.K. for theoretical discussion.
 
I think you are missing the following:

1) The Department of Energy submitted a budget request for $32.5 billion dollars
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.
I'm sorry, but that is sheer insanity.

Trump's plan cuts revenues by about $440 billion per year. $33 billion is a drop in the bucket.

The DoE is less than 1% of the federal budget. Guess where half that money is spent? Oversight, maintenance and security of nuclear materials. So if you don't mind terrorists walking off with a bunch of fissile materials, go ahead and eliminate the DoE. :roll:


2) The request from the Department of Education was 69.4 BILLION DOLLARS....
"Block grants" are not free. It means giving money to the states without stipulations. So unless you're also going to slash federal spending on education by a huge amount, switching to block grants saves nothing.


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 ...
That's 2% of the gap.

You've proposed $108 billion in cuts -- most of which we can't actually cut -- which leaves a $332 billion deficit.

And of course, slashing that spending will in fact cause a contraction in GDP, and job losses, which means even less tax revenues.

I hate to break this to you, but nearly 80% of federal spending is Social Security, Medicare, Medicaid, Defense, Veterans, and interest. Those programs are either untouchable, or Trump has put them off the table (notably defense). That's AFTER years of spending cuts. Unless we severely cut entitlements to seniors and defense spending, we cannot make this tax cut revenue-neutral via spending cuts.

Next time, check your math.

total_spending_pie%2C__2015_enacted.png



4) Trump's tax plan: Simplify the tax code to four brackets....
IRS budget is $11 billion. Yet again, that is chump change as far as the federal budget and Trump deficit are concerned.

If Trump was proposing a tax cut that was genuinely revenue-neutral, and did not wind up taxing the bottom 99% to make tax cuts for the top 1%, that would not be a big issue. Heck, if it was reasonably fair and still progressive enough, I'd be fine with that.

If you expect that to happen, then you are morally obligated to tell us all what you're smoking, and pass it around. :mrgreen:

The last tax plan he released during the campaign offered nothing of the sort. It's a huge tax cut for the wealthy; the top 1% will see their taxes drop by 6%, while the bottom 80% would see 1.7% cuts. It would also eliminate estate taxes, which currently only kick in for estates of $5.4 million and higher (less than 1% of the US population).

Unsurprisingly, Trump's tax plan would heavily benefit... Trump and his family. It would reduce the pass-through rate on his business from 35% to 15%; it would lower his personal taxes by around 8-10%; it would completely eliminate any estate taxes he might have paid. Surprise!


Many on the left think the only way to shrink a deficit is to raise taxes. Spending reductions have the same effect.
Actually, it's not quite the same. For example, pretty much all of Social Security goes into the hands of elderly Americans, who are taxed on it. They also spend it, which generates economic activity, and thus taxable activity. So if we cut Social Security by 10%, tax receipts are likely to drop slightly.

The same if it's a program that employs people, like education. If we have to fire 500,000 teachers because we cut education spending by $70 billion (and yes, that could definitely happen) then that is 500,000 less people who we can tax, or might only tax at a lower rate if they can't find a comparable job, and again that's a big reduction in economic activity.

Last but not least: The US has slashed taxes repeatedly since the 1980s. We've almost never raised taxes since the Reagan years. We keep cutting and cutting, and the debt keeps going up, and the cuts are never enough to satisfies Republicans or conservatives, for whom tax cuts are the solution to every problem -- even when they are destroying a state like Kansas.

So go ahead, explain to us how we can slash $440 billion from federal spending, without spending the US economy into a tailspin. Then watch as Trump borrows trillions to pay for his tax cuts for the rich.
 
Essentially.

That's not to say some won't be implemented.

It's all very T.B.D. though, and not sufficient IMO to make a strong economic argument.

But I suppose it's O.K. for theoretical discussion.

Of course- what else is this forum for, but for us theorists to debate!
 
We keep cutting and cutting, and the debt keeps going up, and the cuts are never enough to satisfies Republicans or conservatives, for whom tax cuts are the solution to every problem -- even when they are destroying a state like Kansas.

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

This comment makes no sense. Government spending is not the only type of spending. You seem to infer that the only way to grow the economy is to increase government spending, which is not true.
 
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)

Of course it is TBD. It is theorettical as everything listed in the OP is theoretical. Trump is not yet the President so of course it is TBD.
 
Government spending is not the only type of spending.

You are assuming the private sector will somehow magically fill the void of government demand when that has never been the case, ever. You seem to argue that the private sector will increase spending by the amount you cut from government, creating a net-zero effect. And that's just lunacy.
 
You seem to infer that the only way to grow the economy is to increase government spending, which is not true.

No, you're inferring that from my post because there's no other way your argument makes any sense. I never said the only way to grow the economy is to increase government spending. You are trying to put words in my mouth in order for you to make an ideological point. Here's the thing; in no world will the private sector ever be able to make up for the drop in demand from government spending cuts. No way. Not ever. What Conservatives argue for, whether they know it or not, is deflation. And deflation is the worst possible thing to happen to the economy.
 
I'm sorry, but that is sheer insanity.

Trump's plan cuts revenues by about $440 billion per year. $33 billion is a drop in the bucket.

The DoE is less than 1% of the federal budget. Guess where half that money is spent? Oversight, maintenance and security of nuclear materials. So if you don't mind terrorists walking off with a bunch of fissile materials, go ahead and eliminate the DoE. :roll:



"Block grants" are not free. It means giving money to the states without stipulations. So unless you're also going to slash federal spending on education by a huge amount, switching to block grants saves nothing.



That's 2% of the gap.

You've proposed $108 billion in cuts -- most of which we can't actually cut -- which leaves a $332 billion deficit.

And of course, slashing that spending will in fact cause a contraction in GDP, and job losses, which means even less tax revenues.

I hate to break this to you, but nearly 80% of federal spending is Social Security, Medicare, Medicaid, Defense, Veterans, and interest. Those programs are either untouchable, or Trump has put them off the table (notably defense). That's AFTER years of spending cuts. Unless we severely cut entitlements to seniors and defense spending, we cannot make this tax cut revenue-neutral via spending cuts.

Next time, check your math.

total_spending_pie%2C__2015_enacted.png




IRS budget is $11 billion. Yet again, that is chump change as far as the federal budget and Trump deficit are concerned.

If Trump was proposing a tax cut that was genuinely revenue-neutral, and did not wind up taxing the bottom 99% to make tax cuts for the top 1%, that would not be a big issue. Heck, if it was reasonably fair and still progressive enough, I'd be fine with that.

If you expect that to happen, then you are morally obligated to tell us all what you're smoking, and pass it around. :mrgreen:

The last tax plan he released during the campaign offered nothing of the sort. It's a huge tax cut for the wealthy; the top 1% will see their taxes drop by 6%, while the bottom 80% would see 1.7% cuts. It would also eliminate estate taxes, which currently only kick in for estates of $5.4 million and higher (less than 1% of the US population).

Unsurprisingly, Trump's tax plan would heavily benefit... Trump and his family. It would reduce the pass-through rate on his business from 35% to 15%; it would lower his personal taxes by around 8-10%; it would completely eliminate any estate taxes he might have paid. Surprise!



Actually, it's not quite the same. For example, pretty much all of Social Security goes into the hands of elderly Americans, who are taxed on it. They also spend it, which generates economic activity, and thus taxable activity. So if we cut Social Security by 10%, tax receipts are likely to drop slightly.

The same if it's a program that employs people, like education. If we have to fire 500,000 teachers because we cut education spending by $70 billion (and yes, that could definitely happen) then that is 500,000 less people who we can tax, or might only tax at a lower rate if they can't find a comparable job, and again that's a big reduction in economic activity.

Last but not least: The US has slashed taxes repeatedly since the 1980s. We've almost never raised taxes since the Reagan years. We keep cutting and cutting, and the debt keeps going up, and the cuts are never enough to satisfies Republicans or conservatives, for whom tax cuts are the solution to every problem -- even when they are destroying a state like Kansas.

So go ahead, explain to us how we can slash $440 billion from federal spending, without spending the US economy into a tailspin. Then watch as Trump borrows trillions to pay for his tax cuts for the rich.

I'm going to come back to this when I have time to respond point by point. But as a starter, I gave 2017 budget projections that I believe are more relevant than what you produced from 2015. We can probably agree that if you order all the spending from largest to smallest the list would look the same for both years but the amounts are different. But since you listed a 440B number (without a source) we need to be looking at 2017 numbers for relevance.
 
He would find out how reckless it is, if short rates were to go back to three or four percent.

Why or how do short rates go back to three/four percent?
 
No, you're inferring that from my post because there's no other way your argument makes any sense. I never said the only way to grow the economy is to increase government spending. You are trying to put words in my mouth in order for you to make an ideological point. Here's the thing; in no world will the private sector ever be able to make up for the drop in demand from government spending cuts. No way. Not ever. What Conservatives argue for, whether they know it or not, is deflation. And deflation is the worst possible thing to happen to the economy.

In both of these posts, you have intimated that any significant economic growth in our country comes as a result of government spending. Here is what you first said:

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

In a discussion about government spending, you argue there that a reduction in government spending will yield less revenue for the government. Since government's revenue comes from the tax base which is intrinsically tied to GDP, the opposite would also have to be true: that an increase in government spending would yield MORE revenue for the government. My argument is that I think that is untrue. I think it is faulty. If I misread your post, feel free to rephrase.
 
I'm going to come back to this when I have time to respond point by point. But as a starter, I gave 2017 budget projections that I believe are more relevant than what you produced from 2015. We can probably agree that if you order all the spending from largest to smallest the list would look the same for both years but the amounts are different. But since you listed a 440B number (without a source) we need to be looking at 2017 numbers for relevance.
OK. Let's look at Proposed 2017.

pres_budg_total_spending_pie.png


$4.2 trillion total.

The amounts didn't change much. E.g. DoE did not increase spending by 1,000%.

The Untouchables (SS, Medicare, DoD, VA, interest) = 87% of the total. That's $3.76 trillion.

Oh, and Trump wants to spend about $100 billion a year on infrastructure spending. And another $20-40 billion on a border wall that won't stop people crossing, because most unauthorized immigrants just fly over it.

You would literally have to terminate 80% of all remaining spending just to close the Trump Tax Gap. That will STILL leave the US with a $600 billion deficit.

As to the costs of the tax plan, $440bn is actually favorable to Trump. It could go as high as $6 trillion over 10 years.
Donald Trump Tax Plan Would Cost Up To $5.9 Trillion : NPR
 
OK. Let's look at Proposed 2017.

pres_budg_total_spending_pie.png


$4.2 trillion total.

The amounts didn't change much. E.g. DoE did not increase spending by 1,000%.

The Untouchables (SS, Medicare, DoD, VA, interest) = 87% of the total. That's $3.76 trillion.

Oh, and Trump wants to spend about $100 billion a year on infrastructure spending. And another $20-40 billion on a border wall that won't stop people crossing, because most unauthorized immigrants just fly over it.

You would literally have to terminate 80% of all remaining spending just to close the Trump Tax Gap. That will STILL leave the US with a $600 billion deficit.

As to the costs of the tax plan, $440bn is actually favorable to Trump. It could go as high as $6 trillion over 10 years.
Donald Trump Tax Plan Would Cost Up To $5.9 Trillion : NPR

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:

The Taxes and Growth Model does not take into account the fiscal or economic effects of interest on debt. It also does not require budgets to balance over the long term, nor does it account for the potential macroeconomic or distributional effects of any changes to government spending that may accompany the tax plan. This plan is a large net tax cut, and therefore, the need to finance it is likely to have macroeconomic impacts of its own. These macroeconomic impacts could vary depending on how and if the tax cut is financed.

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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