Authored by Craig Wilson via The Daily Reckoning,
David Stockman joined Bloomberg Markets to discuss President Donald Trump’s latest budget projections. After the White House and current Office of Management and Budget director Mick Mulvaney released various statements on the budget proposal viability conversations already began within the GOP and Congress.
When prompted by host David Gura over his thoughts, even reflecting on former Treasury Secretary Summers comments that the budget is ludicrously optimistic, David Stockman did not mince words speaking on Washington.
“I think it is fantasy land. They have been kicking the can so long that the magnitude of the problem is almost insuperable. They just imagine options, they imagine policy mixes that have no chance in the world of happening.”
“Not only does this budget project all of this GDP, which can’t happen, it also says we’re going to have what they’ve laid out as a $7.5 trillion gross tax cut over ten years. They’ve identified 15% on the corporate rate, 15% on the pass through and doubled the standard deduction along with all of the rest of the proposals. Yet they say they’re going to pay for it with 100% offset so that there’s no revenue loss.”
During the conversation the Bloomberg host then inserted that the budget offers a “double count” with reference to the math completed by the Administration. Stockman remarked, “Sure, I’m all for a broader base, lower rates – that’s what Reagan did in 1986. But how are you going to come with $7.5 trillion of offsets, when you have the K-Street lobbyists lined up from one end of the swamp to the other. The big dollars are really beyond reach.”
“The biggest loophole you could close is the health exclusion – that’s $200 billion a year. The House Republicans backed out on that during the Obamacare repeal. The next biggest one is $180 billion which is pensions and IRA’s. Do you think they’re going to take pensions and IRA’s away?”
“The third biggest one is capital gains and dividends treated on a preferential basis. When you put all the Wall Street lobbyists, along with the rest of them, on the case they’re not going to do that either.”
“My point is, they pretend to have a tax cut that they haven’t paid for that produces GDP that’s out of this world beyond what’s possible. They end up with budget numbers that are so unrealistic and such a complete fantasy that they might as well not even bother.”
Stockman then urged all that together with the fact that, “they pretend that you can raise defense, veteran spending and have a trillion dollar infrastructure program. That you can ring-fence social security and medicare which is $1.8 trillion, not cutting them a dime.”
“Essentially, they believe you can take $500 billion of a $4 trillion budget and cut the hell out of that little corner and leave all the rest to either grow or stay the same while believing it adds up. It doesn’t.”