CNN op-ed: Trump's Reckless Spending and Tax Cuts, by Edward D. Kleinbard (USC):
President Trump's budget outline combines a surge in military spending with massive tax cuts, purportedly in the name of stimulating our stagnant economy. This strategy follows closely the fiscal agenda of Ronald Reagan — modern history's most fiscally irresponsible President.
Over the past 50 years, the United States has twice endured stretches of four consecutive years where federal government deficits averaged more than 5% of GDP -- the total of goods and services produced in the country. One was in 2009-2012, at the beginning of the Obama administration, the result of an economic and financial crisis not seen since the Great Depression. Budget deficits then reflected fiscal policy the government was embracing in the service of the country, mitigating the pain of the Great Recession and putting us onto a faster path to economic health.
The other was in 1983-1986, in the midst of Ronald Reagan's presidency. Neither foreign wars nor economic crises required these earlier deficits. Instead, they were self-inflicted wounds to the fiscal health of the United States, the results of conscious policy choices to grow the military while slashing taxes. ... Reagan's deficits were unprecedented, and set us on our long-term path of refusing to pay for the government we actually want. ...
[T]here is no basis for massive tax cuts (although we should rewrite the corporate tax code to make it more efficient). The United States already is the second lowest-taxed large economy in the world -- and that includes state and local taxes. Our total tax collections are about 26% of GDP. Conservative-led Britain raises 32.5% of its GDP in tax; Germany is a highly successful developed economy that collects 37% of its GDP in tax.
Nor will massive tax cuts unleash some slumbering economic giant. In the absence of a huge influx of young immigrants, the CBO predicts that the United States will run completely out of slack in the labor supply by 2018. Meanwhile, between now and 2046 the number of Americans over the age of 65 will increase 50% relative to younger adult Americans. For these reasons, among others, the CBO predicts that our sustainable long-term GDP growth rate is about 2%. The US economy cannot grow at record rates simply through the application of magical tax thinking.
It may be hard to accept, but Reagan was the most fiscally feckless President in modern history. Trump is on track to repeat all the same mistakes, but to do so starting from a weaker fiscal balance sheet. His budget ideas are bad for the fiscal health of the country and the welfare of all Americans.