Trump’s budget is a special kind of stupid

Source: Niskanen Center
by Karl Smith

That President Donald Trump’s budget is problematic is something that most economists agree with. There are, however, some prominent voices of dissent. George Mason University economist Tyler Cowen, for example, suggests that the budget is not as problematic as you might think. According to Cowen, ‘the spending cuts are probably not needed. It would suffice to cut taxes only, and allow the economy to grow out of an even-greater budget deficit.’ … To properly make the comparison between growth rates and borrowing rates, we need to adjust for inflation in the same way. Cowen’s argument arguably holds if we measure borrowing rates in nominal terms. Trump budget projections, however, are about real economic growth rates — which means that we should be comparing them to real borrowing rates.” (05/30/17)