Trump's first budget "wildly unrealistic": Ex-White House advisor

U.S. President Donald Trump's first budget was "wildly unrealistic" in its economic assumption and its policy proposals, a former White House economic advisor has said.

In its first full budget sent to U.S. Congress on Tuesday, the Trump administration assumed sustained economic growth of 3 percent and called for 3.6 trillion U.S. dollars in cuts to domestic agencies and social safety net programs for the poor to balance the federal budget within a decade.

"I don't think the United States needs to balance the budget. The United States should have our debt declining as a share of GDP (gross domestic product) and should have a deficit below about 3 percent of GDP," said Jason Furman, former chairman of the White House Council of Economic Advisers under the Obama administration and senior fellow at the Peterson Institute for International Economics.

"I think the best way to achieve that goal is a combination of spending cuts and revenue increases," with the spending cuts focused on reforming entitlement programs and the revenue increases focused on high-income individuals, Furman told Xinhua in a recent interview.

However, the Trump administration insisted that they would not cut retirement benefits for Social Security or health benefits for Medicare, two of the most expensive parts of the federal budget.

They would like making significant cuts to the State Department, the Environmental Protection Agency and other agencies in order to boost defense spending for fiscal year 2018, which starts from Oct. 1, 2017, according to the budget.

Meanwhile, the administration proposed trillions of dollars in tax cuts, aimed mostly at the wealthy, to stimulate economic growth, but assumed it would not add to the fiscal deficit.

According to Furman, experts across the political spectrum agreed that the Trump administration double-counts the 2.1 trillion U.S. dollars in revenue from faster economic growth, used both to pay for the tax cut and to reduce the deficit.

"I think something like the double counting in this budget or the defense of a wildly optimistic economic forecast does reflect the lack of trained economists in the Trump administration," he said.

The budget assumed that U.S. economic growth would accelerate to 3 percent by 2021 and remain at that level for the rest of the decade, much higher than the 1.9 percent average growth rate currently projected by the nonpartisan Congressional Budget Office. But there' s no serious discussion in the budget of how this might be achieved.

"A realistic number for U.S. economic growth is about 2 percent, you know more likely a little bit lower than 2 (percent)," Furman said, attributing the slower economic growth to the aging population, the slowdown of workforce growth and productivity growth.

"The U.S. economy is at potential, there's relatively little scope for lowering the unemployment rate and productivity growth has been relatively low," he said.

The budget is expected to meet with resistance from both parties in Congress and start a new round of fiscal fighting in Washington. Republican Senator John Cornyn has described the budget as "basically dead on arrival." Many Democrats have also opposed the steep cuts to non-defense discretionary spending in the budget.

"President Trump's budget is a stark showcase of the president's broken promises to America's hard-working families," House Democratic Leader Nancy Pelosi said Tuesday in a statement. "Families across America would suffer, with particularly harsh effects on rural communities."

While the Republicans in the House of Representatives would like to have a revenue-neutral tax reform, Furman believed "it's more likely to be a tax cut than a meaningful tax reform" under the Trump administration.

Unless the White House was willing to undertake a bipartisan approach, Furman saw Trump' s plan to pass tax reform this year as "unrealistic."

"The main lesson from the 1986 tax reform is the importance of being bipartisan. The second lesson is the importance of starting from a very serious proposal," Furman said, recalling the last successful comprehensive tax reform in 1986 under former President Ronald Reagan.

"The Reagan Treasury put out a very serious thousand-page proposal, and then it was considered over a long period of time on a bipartisan basis in Congress, and I think that's what should happen again," he said.

Furman said it's very hard to tell what Trumponomics is because there has been a "real divergence" between what Trump talked about on the campaign trail and how he is governing.

"It appears to be a combination of traditional Republic ideas like lower taxes and less regulation with other ideas like restricting immigration, restricting trade and not reforming entitlement programs," he said, noting there are real tensions between Trump's policy goals.

While Trump wants to reduce the trade deficit, he's proposed policies that in many cases, for example deficit spending, would widen the trade deficit, Furman said.

"I think the market has become less optimistic about President Trump's economic agenda," he said.

(ASIA PACIFIC DAILY)