All of Washington seems to be in cardiac arrest over news reports late last week that Donald Trump is planning a budget featuring $10 trillion in cuts over the next decade.
We can only hope and pray that the reports are accurate.
This is an enterprise that has been borrowing $1 trillion a year for the past decade and is expected to continue to do so for years and decades to come. The national indebtedness will soon exceed $20 trillion, and everyone in Washington is in denial about this metastasizing cancer cell when they should be ordering radiation therapy before it kills off the economy.
Yes, even in Washington, $10 trillion is a whole lot of money. It’s roughly equal to the entire amount of debt that was accumulated by Barack Obama in eight years.
The scaremongers say that cuts of this magnitude would have devastating effects on social programs and vital federal services. Wrong. Even with this overdue downsizing, the federal government would still grow in size over the next decade.
It just wouldn’t grow nearly as quickly as it is projected to if nothing at all is done.
Here are the parameters we are talking about. First, over the next decade the United States government is expected to spend close to $50 trillion. So Trump would cut 1 in 5 dollars of expected spending.
Second, the $10 trillion would be in gross spending cuts. Over this same time period, Trump wants to add as much as $1 trillion in infrastructure spending (a waste of money), and there is talk of more than $1 trillion in added defense spending.
Sen. John McCain recently called for $500 billion in added defense spending in Trump’s first term alone.
He is also suggesting one of the biggest tax cuts in history, with tax rate reductions for large and small businesses and for families. This is expected to reduce revenues by $2-4 trillion.
So, about half the spending cuts are required simply to offset the tax cuts and new spending. The rest of the government downsizing is to get back to a balanced budget – one of Trump’s campaign promises.
I keep wondering if – before folks start taking swan dives off the 14th Street Bridge – the shock jocks in the media will ever figure out that Donald Trump is a negotiator. He will (hopefully) call for these big cuts as his opening fiscal bid.
That’s a smart way to alert Congress that there really is a new fiscal sheriff in town. Don’t be surprised if, in the end, Congress moans, “We can’t possibly swallow all of these cuts, so, Mr. President, we will have to slash your savings in half.”
Last year the official federal auditors at the Government Accountability Office reported more than $150 billion a year in fraudulent and/or erroneous entitlement spending through Social Security, Medicare, Medicaid, food stamps and other benefit programs.
Yet no one ever does anything to reduce this rampant cheating, this fraud rate of more than 10 percent. These are the kinds of savings Trump should make a priority.
What is most encouraging about this policy proposal is that it marks a welcome U-turn in economic philosophy from Barack Obama to Trump. Obama’s economists believed that government spending and debt were a “stimulus” to the economy, the more the better. It was a tooth-fairy philosophy that was put to the test and delivered the worst economic recovery in 75 years.
Wages didn’t budge and, in fact, when adjusted for inflation, wages fell for many workers.
We learned once again, and hopefully forever, that government spending doesn’t stimulate growth; it retards it.
Just ask Japan or Venezuela. Every dollar the government doesn’t spend, tax or borrow is a dollar that businesses and families can spend or invest themselves.
What Trump is really proposing is a $10 trillion stimulus to the private economy. It’s about time.