Trump’s Fanciful Budget Proposal
​President Trump released his first full budget plan today and proposed a $3.6 trillion reduction in federal spending over the 10-year forecast horizon. We think spending cuts of this magnitude are likely to be unacceptable to Congress. There were no additional details on tax policy that are material as the OMB budget simply states it “assumes deficit neutral tax reform, which the Administration will work closely with the Congress to enact.†The OMB projects 2.3% real GDP growth in 2017, picking up to 3.0% by 2020 and remaining at 3.0% through 2027. This is an implausible growth assumption, in our view. The Trump budget foresees a small fiscal surplus at the end of the forecast horizon and U.S. debt-to-GDP falling to 59.8% in 2027 from 77.0% in 2016. This compares to the CBO’s baseline forecast of a $1.4 trillion deficit in 2027 on current law and a rise in debt-to-GDP to 88.9%.
RDQ Economics provides global macroeconomic consulting services with an emphasis on U.S. economic fundamentals and monetary policy.
Our views are driven by consistent application of classical economic and monetary principles and has generated superior anticipation of changes in the stance of monetary policy and of movements in economic growth and inflation.
The founders of RDQ Economics, John Ryding and Conrad DeQuadros, have a combined experience of 26 years on Wall Street, 12 years of experience in central banking at the Federal Reserve and the Bank of England and nine years in the independent research space. John and Conrad have worked closely with fixed income, foreign exchange, and equity traders and portfolio managers, which has enabled their analysis and advice to be tailored to a clientele that is focused on trading and investment decisions.
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