Here’s Why Both Democrats And Republicans Are Wrong About The Budget
Ever since the budget was released, a considerable amount of vitriol has been directed toward Donald Trump’s proposed discretionary spending.
Responses have largely been emotionally charged, which given the nature of certain allocations and cuts, isn’t terribly surprising.
What is surprising is a fundamental question seems absent from the discourse: Does a budget crafted by a self-professed business genius actually make sense by the numbers?
Defense spending has been a major lightning rod for criticism and, yes, the number is incredibly high.
In fact, page 15 of the budget brags the increase itself is greater than most national defense budgets in the world.
But in terms of the percentage of the budget devoted to defense, it’s really not that simple.
The highest defense allocation in modern American history was in 1945, the final year of World War II.
Eighty-eight percent of the federal budget was allocated to defense.
Defense allocations dominated the budget early into the Cold War, but slowly tapered off in the late ’50s and early ’60s.
The highest allocation during the Vietnam War was 44 percent.
The highest under Reagan was 27.1 percent. The highest post-9/11 allocation was 20.1 percent.
As for Trump? Applying the proposed figure against the most recent total expenditures would result in around 15.4 percent of the budget allocated to defense.
This is smaller than all but two budgets since WWII.
This defense increase has been met with a disproportionate amount of cuts in other discretionary spending, resulting in a net decrease of $13.6 billion.
This decrease, which has come at a cost to social programs, has been understandably unpopular.
In terms of numbers, however, cuts are one method to achieve a balanced budget, which requires expenditures to equal revenue.
In 2015, the most recent year with final numbers, the budget came out to $3.25 trillion in expenditures against $3.69 trillion in revenue, resulting in an operating deficit of just under $440 billion.
Obviously, a $13.6 billion cut barely scratches the surface. The only other way to rectify this imbalance is to increase revenue, which is where the numbers get iffy.
Federal revenue is almost entirely generated through taxes. Income Tax makes up nearly half, followed by Payroll Tax and Corporate Income Tax.
As such, raising revenue requires raising taxes. The thing is, Trump has repeatedly suggested the exact opposite policy, which would have the exact opposite effect: decreasing revenue.
The main proposal toward offsetting this shortfall in revenue has been a Border Adjustment Tax, which is a 20 percent tax on goods and services imported into the United States.
Even after taking this into account, however, major independent, economic policy centers’ models have suggested Trump’s tax plan would decrease revenue substantially.
The Tax Foundation projects revenue could fall $240 billion.
The Tax Policy Center projects revenue falling $7 trillion over a decade, an average of $700 billion for a single tax year.
The most generous model theorizes Trump’s overall economic policies result in an 3 percent increase in employment and thus, more people paying taxes, but even this shows revenue decreasing by $20 billion.
This means given the most favorable economic conditions, Trump’s budget would actually run at a greater imbalance than that of his predecessor.
That said, a balanced budget is a pretty unrealistic goal — only 12 of 71 budgets since WWII operated at a surplus.
But his entire candidacy was predicated on his business acumen being able to achieve such goals.
If the numbers prove he can not, then the numbers themselves provide enough ammunition to the vitriol against them.