This week, President Donald Trump’s White House released their first full budget proposal. It has gotten a lot of talk, so let me condense it all for you. Here is the rundown of Trump’s first budget.

  1. Massive economic illiteracy when it comes to trade. There is one particular section I want to focus in on. On page seven, the proposal states “Persistent trade deficits go hand in hand with a stagnant recovery”. This could not be further from wrong. When economies go into recessions, the trade deficit gets smaller. On the flip side, during expansions, the trade deficit gets bigger. Our current trade deficit is actually smaller than it was prior to the Great Recession.
  2. The budget claims that it provides a path to be balanced in a decade. As we will soon see, this is ludicrous.
  3. The proposal claims it wants to control spending but simultaneously calls for a trillion dollar public/private infrastructure partnership. The federal government will not spend one trillion dollars but the federal government will put forth two hundred billion to incentivize the private sector to put down the rest.
  4. 2.6 billion is used to fund “high-priority tactical infrastructure and border security technology including funding to plan, design, and construct a physical wall along the southern border”. My question is, was Mexico not supposed to pay for the wall? And how is 2.6 billion going to pay for a wall that will cost closer to 20 billion? The budget also provides funds for 500 border patrol agents and 1,000 ICE agents.
  5. The border adjustment tax is dead… maybe. Donald Trump’s treasury suggested that Trump did not support it. Congressional reporters have reported the same thing. The Wall Street Journal tax beat reported pointed out that it might not be actually dead– crazy things happen.
  6. There are some fairly substantial reforms to entitlements and large cuts.
  7. The proposal calls for the FAA to be privatized!
  8. The defense budget is increased by fifty-two billion. This will allow for 56,400 additional personals. It will increase acquisition and modernization budgets allowing for the navy to purchase eight new ships and for eighty-four new air craft to be bought (seventy F-35s and fourteen F-18s). To fund this, non-defense discretionary spending is cut by fifty-four billion.
  9. This plan includes parental leave tax credits. Thank you, Ivanka.
  10. The budget projects real GDP growth of three percent by 2020.
  11. The plan projects an immediate decrease in the deficit, a onetime increase to follow and a long-term decrease after.
  12. This budget relies on many assumptions which are not that likely. First, it assumes the current House Obamacare replacement bill will pass. It also assumes tax reform will happen and that it will be revenue neutral or positive. It is also assuming the three percent economic growth we talked about earlier—given the political environment, the reforms needed to achieve that are unlikely.
  13. Here is a good chart from Axios on the budgetis7si
  14. cuhlul.PNG
  15. This budget proposal is dead on arrival.
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Posted by Roman Bilan

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