Trump to Unveil Steps Soon to Tackle Budget Gap, Hassett Says
(Bloomberg) -- President Donald Trump will unveil measures soon to address the federal government’s big budget deficit, his chief economist said on Tuesday.
“The deficit is absolutely higher than anyone would like,” Kevin Hassett, chairman of the White House’s Council of Economic Advisers, said. “As you watch our next budget come out -- and you’ll start to see things in the next few weeks -- then you’ll see a much more aggressive stance” in tackling it.
Administrations typically release their proposed budgets at the start of the calendar year. Hassett’s timetable indicates that the Trump team intends to lay out some of its plans for reducing the shortfall before the congressional midterm elections on Nov. 6.
The budget deficit expanded to an estimated $782 billion in Trump’s first full fiscal year as president, based on figures released last week by the Congressional Budget Office. That is the biggest gap since 2012 and compares with a $666 billion shortfall in the fiscal ended Sept. 30, 2017. The Treasury Department may release the official year-end figures as early as Thursday.
Democratic Party politicians have repeatedly attacked Trump’s $1.5 trillion tax cut for blowing a big hole in the budget and for favoring the wealthy -- two charges the president denies.
Speaking to the Council on Foreign Relations in New York, Hassett argued that Trump’s corporate tax cuts are prompting businesses to increase capital spending and thus boosting economic growth.
“I have a hard time imagining that next year won’t be north” of 3 percent when it comes to the growth of gross domestic product, he said.
Federal Reserve policy makers, in contrast, see the expansion slowing to 2.5 percent in 2018 from 3.1 percent this year, according to the median projection of central bankers released last month.
While Hassett declined to give details of the administration’s budget plans, he said that two things stand out for him as an economist when it comes to the deficit.
“One is there is a surprising extent to which discretionary spending is an important part of the story in the first 10 years,” he said. Spending on entitlement programs such as Social Security and Medicare “are part of the story over the very, very long run.”
“If you’re going to have a fiscal consolidation modeled after other countries that have done it and succeeded, then you would want to account for those two facts,” Hassett said.
Discretionary spending amounted to 6.3 percent of gross domestic product in 2017, compared with a 7.9 percent average since 1980. Outlays for mandatory programs totaled 13.6 percent, versus an average 11.1 percent since 1980.
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