The proposal sends a strong message to Washington that the president intends to jump-start the country’s lagging economy and reign in the size and scope of the federal government.
If implemented by Congress, the plan could spark economic growth not seen in more than a decade and put the country back on a sustainable fiscal path.
Here are nine key aspects of the plan.
1. Balances within 10 years.
Balancing the budget within 10 years is a benchmark that congressional Republicans have and should continue to strive for. None of the budgets submitted by the Obama administration ever balanced, and instead added $10 trillion to the national debt.
This budget takes a major step in the right direction by reaching a surplus of $16 billion in fiscal year 2027.
On the other hand, it is concerning that there are not more concrete cuts spelled out within the president’s proposal. The budget lists a total of $3.6 billion in cuts. It attributes another $2.1 trillion in savings to “economic feedback.”
2. Relies on optimistic economic growth projections.
These projections are a key ingredient in getting the debt under control and reaching balance by 2027. The growth projections have two flaws and one strength.
The first flaw is that the Congressional Budget Office’s baseline—the rate of growth expected with no change to policy—is probably too optimistic to begin with. The Congressional Budget Office has been forced to lower its future growth forecast every year since 2009.
The second flaw is that the plan expects the president’s policies to sustain growth rates at the outer limit of pro-market optimism despite unfavorable demographics.
The president’s economic projections do have a major data point in their favor: They represent a return toward the long-run trend in per capita gross domestic product.
That deviation from trend is partly to blame on the stultifying economic policies of the previous decade. Removing those constraints will be the first step in restoring the income growth to which Americans are long accustomed.