The assumptions of Trump’s first budget will need further scrutiny in the wake of economists terming it as being based on “rosy assumptions”.
In efforts aimed at cutting the funding of healthcare and food assistance programs, U.S. President Donald Trump has asked lawmakers to cut $3.6 trillion in government spending over the course of the next 10 years.
The austerity in these two programs are offset by increased spending allocation for the military.
It is now for the Republican controlled U.S. Congress to decide whether they will go through the politically sensitive proposals.
Irrespective of whether the proposals in their current forms sail through the legislative process, which is unlikely, they nonetheless place Trump’s vision of governance that aims to radically cut assistance to lower-income groups.
Given Trump’s standing on Obamacare, the biggest funding cuts are in Medicaid healthcare program for the poor. This is already embedded in a Republican healthcare bill passed by the House of Representatives.
Trump is pushing lawmakers to cut at least $610 billion from Medicaid and more than $192 billion from food stamps over a decade with the aim of balancing the budget within 10 years.
The Committee for a Responsible Federal Budget, a nonpartisan policy organization, has termed Trump’s proposal as having full of gimmickry, being unrealistic and being based on “rosy assumptions” of economic growth that would reach 3% annually by the end of his first term.
As per the Congressional Budget Office, the U.S. economy is projected to grow at 1.9% per year.
The White House has stated, the proposed tax cuts will help fuel growth and will pay for themselves by generating an additional $2 trillion in revenue over 10 years.
As per Lawrence Summers, a former economic adviser to former U.S. President Barack Obama, the Trump administration was double-counting its savings by saying it would help close budget deficits while also offsetting the revenue lost by cutting tax rates.
“It appears to be the most egregious accounting error in a presidential budget in the nearly 40 years I have been tracking them,” wrote Summers in the Washington Post.
However Trump’s budget office director, Mick Mulvaney, said his office made other assumptions that were probably too conservative.
“We stand by the numbers,” said Mulvaney.
As per Trump’s proposals, half of the U.S. emergency oil stockpile, which was created in 1975 after the Arab oil embargo which caused fears of price spikes will be sold.
This particular proposal took the oil markets by surprise and briefly pulled down U.S. crude oil prices.
Republicans are under pressure to deliver on proposed tax cuts, which essentially are the cornerstone of the Trump administration’s economic agenda.