Email #169: “fiscal sanity”?

When Mick Mulvaney was appointed budget director in February, you said he would bring “fiscal sanity to Washington.” Mulvaney has now released a full version of the President’s proposed budget. It balances if the U.S. has a continuous 3% GDP growth rate over the next decade.

“It used to be normal,” he said. “Ten years ago it was normal.” But ten years ago it was not normal. It hasn’t been normal for decades. He said the average has been 3.2% since 1948. But the average since 1980 is only 2.6%. Is it “fiscal sanity” to build a budget on the assumption that a four-decade norm will suddenly change?

It is also true that the U.S. normally has individual 3% years. But the Bureau of Economic Analysis reported that we just went a record-breaking decade without one. From 2007-2015, the highest peak was only 2.7. That’s never happened before in the 85 years that the BEA has been keeping records.

Perhaps Mulvaney’s 3% projection might make some sense if recent indicators suggested a new upward trend. They don’t. The last quarter of 2016 the GDP increased 2.1%, and in the first quarter of 2017 it increased only 0.7%. That means the odds of 2017 hitting an average of 3% are around zero. Since the budget year begins in October, Mulvaney’s projection is wrong from the start.

Mulvaney’s 3% is also much higher than projections from your own Congressional Budget Office, the Federal Reserve, and the International Monetary Fund. Former Treasury Secretary Larry Summers said the budget was “ludicrous” and Mulvaney’s 3% projection a “logical error of the kind that would justify failing a student in an introductory economics course.”

Republican Rep. Mark Sanford was equally direct yesterday:

“It’s not only a myth, it’s frankly a lie… we have to base it on real numbers… if you’re wrong on these numbers, it means all of a sudden we’ve created a $2-plus trillion dollar hole for our kids and grandkids here going forward.”

I’ve never taken an economics course, but even I can see that Mulvanehy’s reasoning is circular. He said “if you don’t” use 3%, “the budget will never balance. If you assume 1.9 percent growth, my guess is you’ll never see a balanced budget again.” This is exactly right. Trump’s tax cuts cannot be balanced.

But in Mulvaney’s defense, 3% is not strictly impossible. It’s just overwhelmingly unlikely. Mulvaney is a high-stakes gambler, and he’s placing all of our chips on the likelihood of a perfect roll of the President’s economic dice.

Are you still calling this “fiscal sanity”?

Email #168: “Save … Medicaid”?

The White House email I received yesterday announced:

“The President’s Budget does not cut core Social Security benefits. And the President is fulfilling his presidential campaign promise not to cut Medicare benefits.”

But what about his promise not to cut Medicaid? He said it in the same sentence in May 2015:

“I’m not going to cut Social Security like every other Republican, and I’m not going to cut Medicare or Medicaid.”

He tweeted it too:

“I was the first & only potential GOP candidate to state there will be no cuts to Social Security, Medicare & Medicaid.”

And he said it again a month later when he officially declared he was running for President:

“Save Medicare, Medicaid and Social Security without cuts. Have to do it.”

But the President’s budget would cut over $800 billion from Medicaid over the next decade. Medicaid provides health care for the neediest Americans. The President also cuts $272 billion from welfare programs, including $193 billion from food assistance. Even Rep. Mark Meadows, leader of the House Freedom Caucus, was disturbed:

“Meals on Wheels, even for some of us who are considered to be fiscal hawks, may be a bridge too far.”

In exchange, the budget eliminates the estate tax, which only affects estates worth more than $5.5 million and raised $19.3 billion in 2014. The President would also reduce the tax rate for those with the highest incomes and eliminate the alternative minimum tax. Instead of paying 39.6%, people earning over $418,400 would pay only 35%. The Atlantic calculates that the wealthiest 1% of Americans would save over $1,000,000 each. According to his 2005 tax records, the President would personally save over $31,000,000.

People who receive Medicaid and food stamps are at or below the poverty level. That’s $27,821 for a family of three.

How can the President submit a budget that offsets tax cuts that disproportionately benefit the wealthiest through cuts to programs that benefit the most needy? Budget director Mulvaney calls this “reform.”

I call it repulsive.

It is your moral duty to reject this budget.

Email #84, Subject: “fiscal sanity”?

You recently applauded the appointment of Mick Mulvaney as the President’s Budget Director, saying he would bring “fiscal sanity” to Washington. Mr. Mulvaney recently released a list of proposed funding cuts that include the top programs for the arts, humanities, and public broadcasting. These are the same programs that you have been voting against since you took office in 1993. The argument hasn’t changed either. You and your GOP colleagues say we can’t afford them.

So let’s look at their annual budgets:

National Endowment for the Arts                           $148 million

National Endowment for the Humanities               $148 million

Corporation for Public Broadcasting                        $445 million

Together they total $741 million. While that is only a tiny fragment of the government’s $4 trillion annual budget, it is not illogical to argue that we need to trim pennies wherever we can.  But now look at the annual costs required by two of the President’s recent executive orders:

5,000 new Border Patrol agents                               $900 million

10,000 new immigration officers                             $3.9 billion

The first alone exceeds the proposed cuts by $159 million, which is more than either the NEA or NEH receives individually. The second costs more than five times the combined cuts, and yet you and your fellow GOP deficit hawks have endorsed this new spending. You have also agreed to move forward with construction of the “Great Wall” at a cost of $15-25 billion. Estimates for the President’s proposed transportation infrastructure spending range from $500 billion to $1 trillion, and his tax cuts will cost another estimated $1 trillion in annual revenue losses.

Check my math, but I believe that totals between $1.5 and 2.1 trillion. And that’s before the increase in military spending the President has also signaled. These figures are so high, cutting $741 million from the NEA, NEH, and CPB has no effect. Even rounding up to an even $1 billion (which in itself is more money than either the NEA or NEH receives individually), the cuts would offset the President’s increased spending by only $.001 trillion.

You told me in a letter last month: “Families all across our nation understand what it means to make tough decisions each day about what they can and cannot afford and government officials should be required to exercise similar restraint when spending the hard-earned dollars of our nation’s citizens.”

So where is your “restraint”?

What “tough decisions” are you making about what you “can and cannot afford”?

In what possible sense is this “fiscal sanity”?