It is superpower suicide
Donald Trump’s first budget blueprint is a macro-economic scandal. It does nothing to contain the spiralling costs of middle class entitlements and pensions that threaten the United States with slow atrophy, or to tackle America’s productivity crisis.
The brutal document sent to Congress ring-fences Medicare, social security, and the giant programmes that make up US$2.5 trillion of mandatory spending, and it raises defence outlays by US$54 billion, or 10%. These do not in themselves lift the country’s declining trend growth rate.
The Congressional Budget Office estimates that such a course would drive the budget deficit to $1 trillion in short order, and to 5% of GDP on a structural basis by the mid-2020s even if all goes well.
President Trump has forecast growth of 3% or 4%. From what we have seen so far, his plan would leave the U.S. economy mired in stagnation with a long-term speed limit sliding ineluctably from 1.5% to nearer 1%. There may be an immediate sugar rush from cyclical effects, but it would burn out with no lasting improvement.
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