Trump’s Budget Defies Logic

Larry Summers: “Details of President Trump’s first budget have now been released. Much can and will be said about the dire social consequences of what is in it and the ludicrously optimistic economic assumptions it embodies.  My observation is that there appears to be a logical error of the kind that would justify failing a student in an introductory economics course.”

“Apparently, the budget forecasts that U.S. economic growth will rise to 3.0 percent because of the administration’s policies — largely its tax cuts and perhaps also its regulatory policies.  Fair enough if you believe in tooth fairies and ludicrous supply-side economics.”

“Then the administration asserts that it will propose revenue neutral tax cuts with the revenue neutrality coming in part because the tax cuts stimulate growth! This is an elementary double count.  You can’t use the growth benefits of tax cuts once to justify an optimistic baseline and then again to claim that the tax cuts do not cost revenue. At least you cannot do so in a world of logic.”

Vox: Trump’s budget relies on magic economic growth.