This post Trump’s $4 Trillion Fiscal Hole appeared first on Daily Reckoning.
[Ed. Note: To see exactly what this former Reagan insider has to say about Trump and the fiscal threats from politics and the debt ceiling, David Stockman is sending out a copy of his book Trumped! A Nation on the Brink of Ruin… And How to Bring It Back to any American willing to listen – before it is too late. To learn how to get your free copy CLICK HERE.]
The “you ain’t seen nothing yet” rule applies from here on out.
The GOP was unified on Obamacare “repeal” but completely fractured on “replace,” both on policy philosophy and fiscal cost.
That particular chapter of the “replace” saga, however, is chicken feed compared to finding a coherent majority on measures to “replace” the $4 trillion of revenue loss from the corporate and individual tax cuts promised by Trump and embraced widely by the GOP rank and file.
Wall Street has been drooling about the prospect of cutting the corporate rate to 20% and other related corporate tax reforms. These measures would reduce revenue by $2.1 trillion over a decade.
On top of that, there’s the revenue loss from lowering the top individual tax rate to 33%, collapsing the tax brackets from seven down to three (33% 25% and 12%) and raising the standard deduction.
That’s another $2 trillion of Federal receipts gone missing over the next decade, thereby widening the fiscal hole to the above mentioned $4 trillion.
Good luck with that, as the kids say. So with a $4 trillion funding hold, the Trump Stimulus is heading for oblivion.
But here’s the true shocker of the present moment in American governance…
The Trump White House and purported GOP majority on Capitol Hill are structurally incapable of cutting even $1 from the Federal government’s current $4.2 trillion annual spending level.
That’s right. I’m not being figurative here. I mean that the motley ruling party on display Friday afternoon is literally incapable of cutting one single net dollar of Federal spending from the current built-in baseline.
In a word, Trump’s $54 billion per year defense increase will more than exceed any potential cuts in discretionary spending that the fragile GOP majorities could agree upon. At the same time, 80% of non-defense spending is accounted for by entitlements and interest payments.
Trump has taken the former off the table, of course, while the latter is untouchable.
In short, the vaunted pivot to “tax cuts” purportedly now underway is equivalent to that of a pole-vaulter unaware of the fact that on the far side of the bar is a pit with virtually no bottom.
That is to say, repealing taxes is even easier to advocate than repealing Obamacare, but replacing the $4 trillion revenue loss is next to impossible.
What this boils down to is that the Trump/GOP government has a $4 trillion promise and virtually zero capacity to fund it. And that fiscal hole is absolutely real because the GOP Congressional leaders’ insistence that the tax bill must …read more
Source:: Daily Reckoning feed
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