Get ready folks, we are going to hear more parseltongue and fake news catch phrases in the next several weeks and months surrounding the federal budget, it already began today.
As we have discussed numerous times, President Trump is going to propose a $10 trillion spending cut over ten years – or $1 trillion per year. This is entirely reasonable considering the scale and scope of government.
Baseline for understanding – The entire U.S. Gross Domestic Product (GDP) is roughly $20 trillion. The total of all current income taxes is roughly $4 trillion, or 1/5th of GDP.
President Trump’s economic plan is predicting an earnest rate of economic growth of 4%. We feel this is the minimal achievable in FY 2018, but all projections say at least 4% GDP growth is anticipated. Four percent of growth equals an additional $1 trillion added to GDP. The tax revenue from the GDP growth is $200 billion/per year (1/5th of $1 trillion). Or $2 trillion over the 10-year projection.
“Fake News Terminology” – The fake news catch phrase is: “two-thirds of the budget is spent on entitlements” (Social Security/Medicare).
Yes, entitlements equal approximately $2.5 trillion; and yes, the current budget is approximately $4 trillion. However, this is a false term because the SS/Med expenditure is constantly being refreshed by an additional $2.5 trillion in Social Security/Medicare taxes received that are beyond the individual income tax rate.
Think of it this way – If you have $4 to spend at the grocery store (your budget), but the bus ride to the store costs $2.50, you could say the bus ride equals two-thirds of your budget. However, if I gave you the bus fare in addition to your $4 budget, you are not spending your budget on bus fare. This is the way SS/Medicare is handled in the budget.
Just like when we went through the “sequester cut Armageddon” narrative of 2012, the media relentlessly push this ridiculous fake term in order to make it appear the discretionary budget is much smaller than it is.
Simple common sense math you can do in your head, shows you how fake the term is. If the budget was actually $4 trillion, and entitlements came from that budget equaled $2.5 trillion (two-thirds) it would be impossible to cut $1 trillion out. Again, it’s common sense.
♦ President Trump is proposing a 10% first year increase in defense spending. That equals approximately $54 billion more for defense. If you look at the income from projected GDP growth (4% = $200 billion), you can see how easily that expenditure is covered.
♦ President Trump is proposing significant wholesale cuts to all other departments including Dept of State and EPA. The U.S. State Department has over 70,000 employees, that alone is ridiculous. Easily the DoS can eliminate 20% of staff, and find efficiencies well beyond those numbers.
Essentially, President Trump’s proposed outline is a decrease of 10% per department. Easily attainable, especially when you consider these departments have been operating at around 3% rates of growth due to nine years of base-line budget growth without a federal budget in place.
You only need to look back to 2006 to see federal spending was under $3 trillion. Fiscal year 2008 was the last year we had a federal budget in place. Every year since then has been continuing resolutions, omnibus spending, debt ceiling increases and base-line budget growth (spend 3% more) based on prior year expenditures.
President Trump is the first President in 30 years to actually propose a budget that reduces spending in whole numbers from the prior year.
President Trump is proposing a reduction in actual spending, not a reduction in the rate of growth of spending. Remember, 3% of the proposed cut is just not spending more than the prior year (that’s the base-line budget growth); consequently depending on the department the actual cut is much less than 10%.
The UniParty is going to fight hard, very hard, to retain their spending. Don’t be surprised to see GOPe “conservatives” demanding President Trump spend more money. We have been repeating this warning since he announced his bid for the presidency in 2015.
The fight within the swamp will be on this budget battle, we must all rally to support this righteous swamp draining initiative and fight back against the false assertions being made in the media and elsewhere. Do Not expect your favorite pundit to be on our side in this challenge, there are trillions of dollars at stake.