Opinion

Opinion | Richard North Patterson

Trump’s ruinous fiscal fraud

DAY 34 - In this feb. 22, 2017, file photo, President Donald Trump, followed by Treasury Secretary Steven Mnuchin, left, and White House Economic Council Director Gary Cohn arrives for a meeting on the Federal budget in the Roosevelt Room of the White House in Washington. (AP Photo/Evan Vucci, File)
Evan Vucci/Associated Press/File
President Trump arrived for a meeting on the federal budget in the Roosevelt Room of the White House on Feb. 17.

President Trump’s pending budget proposal is a social and fiscal nightmare, a mélange of fraudulent precepts and broken promises which augur worse to come.

It attacks the most vulnerable Americans, including his working-class base. Often they need direct government assistance, not least to keep 6.2 million white working-class voters out of poverty. Victims include rural communities — Trump strongholds — which experience far greater economic distress than do their urban counterparts; the dozens of programs slashed include home heating assistance, which enables recipients to endure harsh winters without incurring financial hardship to survive.

The budget guts vital government functions. Forget the arts, humanities, or public broadcasting. Trump cuts the State Department by 29 percent; the EPA by 31 percent; NIH by 20 percent; and most other departments by 12 to 21 percent. Programs cut include food stamps; after-school programs; foreign aid; medical and scientific research; road and transit construction; job retraining for displaced workers; and aid to low-income and minority college students. Asked why Trump eliminated programs to curb climate change, budget director Mick Mulvaney responded: “We consider that a waste of your money.”

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But Trump’s budget does nothing to reduce deficits. It does not address entitlement programs or interest on the debt — 85 percent of federal spending. Yet federal debt is 77 percent of GDP — the highest since the Truman administration. Since the financial crisis of 2007, it has doubled. This is fiscally unsustainable.

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Yet his new tax proposals, if enacted, will hasten this trajectory to the point of no return. The upper-income tax cuts Trump pledged during his campaign would further explode our debt — according to the non-partisan Committee for a Responsible Federal Budget, by about $5.3 trillion over the next decade. Says CFRFB director Maya Mac Guineas, “His promises will add to the debt tremendously unless he starts talking about how to pay for things.”

But Trump has never seriously addressed this critical question. While not yet fully detailed, his current plan for reducing upper-bracket rates — not to mention eliminating the alternative minimum and estate taxes — promises the same cascade of debt as did his campaign proposal. Replacing this unpleasant reality with magical thinking, Trump claims that his tax cuts will pay for themselves by fueling growth in GDP by 3 to 3.5 percent, a fantasy figure rejected by reasonable economists in both parties. But even this exercise in make-believe falls short: paying for Trump’s new program, experts believe, would require an extraterrestrial growth in GDP of 4.5 percent.

This is where dissembling becomes a dereliction of presidential duty. By themselves, his proposed cuts in corporate taxes — which also benefits hedge fund and real estate billionaires — will increase our debt in the coming decade by another $2 trillion. His total package, the CFRFB estimates, will add roughly $5.5 trillion more debt in the same 10 years, while disproportionately benefiting the wealthiest Americans. Overall, his tax proposals are estimated to explode the national debt over that period to a ruinous 111 percent of GDP.

Trump comprehends none of this. “I made a fortune by using debt,” he said during the campaign, “and if things don’t work out I renegotiate the debt.” But, unlike a casino, the federal government cannot declare bankruptcy. Debt held by the public stands at $14.4 trillion. Stiffing debtholders, foreign and domestic, would throw financial markets into freefall.

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This raises a related problem. Much of our debt is held by foreign creditors — especially China. This could become a source of Chinese leverage in foreign, trade and economic policy. Conversely, foreign creditors fearful of our fiscal path could sell off US debt, increasing our borrowing costs and triggering an economic crisis.

A further difficulty, history shows, is that massive tax cuts and rising debt fuel income inequality. Here, yet again, the victims include those to whom Trump promised the most.

All this shatters the GOP’s pose as the avatar of fiscal probity and balanced budgets. To placate its donor class and other anti-tax zealots, Republicans now embrace tax cuts for the privileged, no matter how socially and economically devastating. Trump’s hasty outline is not “tax reform” — it is an unmediated giveaway which accelerates the damage done by his retrograde budget proposal. For the Republican Congress to adopt an agenda which even approximates Trump’s blueprint would be a knowing embrace of fiscal irresponsibility.

It was not always so. A quarter–century ago, President George H.W. Bush, proposed a deficit reduction program including increased taxes which, in turn, helped Bill Clinton to balance the budget. But the Republican right rebelled, dooming Bush to defeat in 1992. And so the wrong lesson was learned — tax cuts matter; deficits do not — and adherence to principle became the pretense that principle still exists.

But for Trump, pretense is all. By not addressing entitlements and their defining impact on the budget, he ignores what any true conservative could tell him – he will make our societal and fiscal future exponentially worse. So will the GOP’s insistence on placing tax cuts for corporations and the wealthy over controlling deficits - further increasing our interest payments on the debt - while disingenuously pretending to attack deficit spending by shredding the social safety net for the economically marginal.

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But no anomaly is too grotesque. Under Obama, Republicans opposed allocating $1.1 billion to fight the Zika virus unless offset by spending cuts. They seemingly have no such scruples about Trump’s preposterous wall. What may be sacrificed to tax cuts is a promise which would do struggling Americans some actual good — Trump’s $1 trillion infrastructure program.

To be sure, Democrats have their own fiscal hypocrisies – not least in scaring seniors with Republican hopes of privatizing Social Security and Medicare, prioritizing political gain over real solutions. But during the campaign Hillary Clinton proposed saving entitlements by upping taxes on high earners. In contrast Trump ducked reality, promising to preserve entitlements without saying how.

Now Republicans own the presidency, both houses of Congress – and a pledge whose impossibility they are choosing to ignore. Still, if the GOP’s self-created fiscal calamity crisis later forces House Speaker Paul Ryan to pursue real deficit reduction, it would doubtless come from seeking to privatize entitlements – at whatever cost to seniors who need them most – not by taxing those who could most afford it.

For now, congressional leaders have agreed on a temporary spending bill which keeps a government open until September. But this merely defers the day of reckoning – on Trump’s budget proposal, his tax plan and, more fundamentally, on the fiscal time bomb Trump and his party pretend does not exist.

Thus does cynicism breed disaster.

Richard North Patterson’s column appears regularly in the Globe. His latest book is “Fever Swamp.” Follow him on Twitter @RicPatterson.