03 April 2016

Donald Trump's Delusional Economics (Warning - This Post Contains Highly Technical Math: Arithmetic)

Yesterday Trump had an interview with Bob Woodward of Watergate fame. I used to wonder whether Trump was an idiot or just hoped that 51% of voters were. This interview made it clear that Trump's chief obstacle to understanding the economy is a tenuous grasp of arithmetic.

Donald plans to cut the top tax rate on individuals from nearly 40% to 25% and to cut corporate income tax from 35% to 15%. Credible analysis of his plans suggest that it would cut federal revenues by about $1 trillion per year, reducing federal taxes as a percentage of GDP from 19% to 14%.

Donald has revealed no plans to cut government spending, so the best estimate is that his plan will increase the annual deficit about $1 trillion per year. Without offsetting cuts, every dollar of lost tax revenue is one more dollar of new debt.

In yesterday's interview, Donald claimed that he would eliminate the $19 trillion government debt within 8 years.

Let's take him at his word for a moment and assume that because he's president the economy will magically grow enough to offset not just the $1 trillion in lost taxes but pay down another $2.375 trillion of debt each year. (That's what it takes to reduce a $19 trillion debt to zero in 8 years.)

Here are the numbers:
Donald drops federal taxes from average of 19% of GDP to 14%.
Donald keeps government spending stable.
Donald reduces the national debt by $19 trillion in 8 years.

The current projections look like this:

What is Trump promising? What sort of GDP would allow him to cut taxes as a percentage of GDP AND reduce the debt? This:

To make his promises add up would mean GDP leaping from close to $20 trillion to roughly $50 trillion, which is about what total global GDP is right now.

Where does Donald get his information? It's hard to tell if it is from Marvel or DC but it's certainly a comic book and not a text book.


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