Economists around the country are calling foul on a $2 trillion sleight of hand in the budget OMB Director Mick Mulvaney released while popular vote loser Donald Trump is away. It's either a dose of the kind of magical budget thinking House Speaker Paul Ryan perfected while he was chairman of the House budget committee, or it's a massive math error as Jonathon Chait suggests.
One of the ways Donald Trump’s budget claims to balance the budget over a decade, without cutting defense or retirement spending, is to assume a $2 trillion increase in revenue through economic growth. This is the magic of the still-to-be-designed Trump tax cuts. But wait—if you recall, the magic of the Trump tax cuts is also supposed to pay for the Trump tax cuts. So the $2 trillion is a double-counting error.
Trump has promised to enact “the biggest tax cut in history.” Trump’s administration has insisted, however, that the largest tax cut in history will not reduce revenue, because it will unleash growth. That is itself a wildly fanciful assumption. But that assumption has already become a baseline of the administration’s budget math. Trump’s budget assumes the historically yuge tax cuts will not lose any revenue for this reason—the added growth it will supposedly generate will make up for all the lost revenue.
But then the budget assumes $2 trillion in higher revenue from growth in order to achieve balance after ten years. So the $2 trillion from higher growth is a double-count. It pays for the Trump cuts, and then it pays again for balancing the budget. Or, alternatively, Trump could be assuming that his tax cuts will not only pay for themselves but generate $2 trillion in higher revenue. But Trump has not claimed his tax cuts will recoup more than 100 percent of their lost revenue, so it’s simply an embarrassing mistake.
Now it's entirely possible that Mulvaney and all his minions really are dumb enough to make such a basic double-accounting error. But it's also possible that Mulvaney learned everything he knows about budgeting from Paul Ryan, and thus thinks this is all perfectly fine. With this crowd, anything's possible.