Critics Focus On Trump Budget's Biggest Opponent: Basic Math

WASHINGTON, DC — President Trump's budget chief Mick Mulvaney defended the administration's proposed budget Wednesday as it faces accusations of committing a basic math error: double counting. Mulvaney denied that the budget commits this fallacy, but this answer is difficult to square with the administration's prior policy commitments.

The problem is this: Administration officials have said that the Trump tax plan will lower the effective rates paid by Americans. And yet they've also said that because the tax cuts would stimulate economic growth and add about $2 trillion to the economy, the amount of revenue the government takes in through taxes will remain the same; though many economists regard this as a fanciful assumption to make, it is conceptually possible. Overall, this plan entails that the federal budget would still include a deficit of about $500 billion.

However, when Mulvaney and his team crafted the administration's budget, it relied on the the $2 trillion in economic growth produced by the tax cuts to wipe out the budget deficit over the next decade. But this amounts to double counting the $2 trillion of economic growth. First, the Trump administration says that tax cuts won't mean the government loses money because they'll spur economic growth. Then it says that it can get rid of the budget deficit by adding on that same economic growth on top of the budget, which has already assumed that growth.

Larry Summers, former chief economist of the World Bank and director of the White House National Economic Council under President Obama, said this mistake amounts to "a logical error of the kind that would justify failing a student in an introductory economics course." Matt Yglesias on Vox called this error "using the same magic bean twice."

But it's not just left-leaning observers pointing out this mistake: Maya MacGuineas, president of the Committee for a Responsible Budget, which advocates paying down the debt, criticized the budget, saying, "The same money cannot be used twice."

Keith Hennessey, the director of the National Economic Council under President George W. Bush, was equally critical of the error: "Either the $2 trillion of added cash inflows resulting from faster economic growth can pay for more government spending and reduce the need for government to borrow, or that $2 trillion can replace the cash lost to the government from cutting taxes and reduce the size of painful tax increases you need to propose. Arithmetic forces you to choose one goal or the other."

Mulvaney, in testimony before Congress on Wednesday, said that the budget plan simply assumes that tax reform will be deficit neutral without relying on economic growth to fill the gap. However, this assertion directly contradicts Treasury Secretary Steve Mnuchin, who pledged that the administration's tax plan will be a tax cut paid for by economic growth.

It's important to note that the administration's budget will not become law; Congress writes and votes on the budget. Presidents put forward their own budget drafts to lay out their priorities and to give lawmakers a place to start in negotiations.

This means that the budget doesn't have to take into account any changes lawmakers might make to its plans But it should reflect a consistent vision from the White House, which the current version does not. The White House has either proposed two conflicting policies, or it has double counted the the sum of $2 trillion in its budget.

"You can’t have it both ways," as Hennessey said, "and $2 trillion is a big hole to fill."

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