The Trump administration's budget misses the mark

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Even by the standards of a discredited genre, President Donald Trump's budget for 2019 is hard to take seriously. Judging the plan not as a fiscal blueprint but as no more than a vague indication of Trump's fiscal thinking, the document is still objectionable.

The administration's plans are based on recklessly optimistic economic forecasts and proposals for spending cuts that few in Congress will pay attention to, much less vote for. Last week's bipartisan agreement to ramp up public borrowing this year and next rendered the projections out of date before they were even published — notwithstanding a hastily drafted "addendum" that says it all fits together.

To be sure, the basic theme comes through clearly: Budget deficits don't much matter. The government can cut taxes and promise to spend less without really expecting to, and everything will be all right.

The White House wants to spend $4.4 trillion next year and collect roughly a trillion dollars less than that in taxes, yielding a budget deficit of nearly 5 percent. For an economy at or close to full employment, with public debt at 80 percent of gross domestic product — already high enough to narrow the fiscal options when the next economic setback comes around — that's indefensible.

After 2022, the administration's projected national debt gradually declines, falling to about 73 percent of GDP by 2028. But this slow fiscal improvement occurs only thanks to economic growth of roughly 3 percent — year in, year out for the next decade — combined with cuts in non-defense discretionary spending that are not just unrealistic but preposterous.

Some of the administration's critics point out that the new budget gives up on the longtime Republican goal of eliminating the deficit over a decade. But balancing the budget 10 years from now is the wrong goal. Gradually containing and then reducing the national debt, on the basis of plausible fiscal and economic assumptions, should be the aim.

If the economy slows, fiscal deficits will be appropriate; if it keeps growing strongly, surpluses will be. The strategy should be gradual downward pressure on the debt, as economic conditions allow, through responsible control of spending combined with adequate taxation.

In short, focus on the right thing, and mean it. The U.S. has rarely seemed so far from getting this right.

— Bloomberg View

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