By Judd Gregg - 03-06-17 06:00 AM EST
People who subscribe to the idea of fiscal integrity in budgeting, federal spending and taxing have been a bit befuddled by the Trump agenda.
President Trump - along with his Office of Management And Budget director Mick Mulvaney, Treasury Secretary Steven Mnuchin and chief economic adviser Gary Cohn - has set out on a course where the goal is to increase defense spending, cut most other discretionary spending, leave untouched both Social Security and Medicare, and enact major Tax Reform that includes large individual and corporate rate reductions.
Since three of these four men are either native or adopted New Yorkers - Mulvaney, a South Carolinian, is the exception - they probably know of a bridge in Brooklyn they can sell that allows them to do all this without significantly affecting the nation's debt.
Actually, they have even a better idea.
It is dynamic scoring.
Mnuchin told CNBC in his first extensive interview that it was the administration's intent to use dynamic scoring. He said this a few times, just to make the point clear.
Scoring on tax reform (from the Joint Committee on Taxation) and on spending issues (from the Congressional Budget Office) might bind the Congress. But the administration is going to be unbound because it will use dynamic scoring.
Mnuchin also said that he thinks the economy will grow at a yearly rate of three percent during the Trump era.
Most economists are projecting a growth rate of about 1.5 percent for the foreseeable future, so three percent represents a rather large jump.
However, if the economy were to grow at three percent, then it is entirely possible that the Trump team could accomplish all the things they want without aggravating the national debt problem significantly.
In fact, if you start compounding a three percent growth rate and take it out ten years - the usual term of the budget window - they can probably declare that they will reduce the debt in real terms.
A three percent growth rate is a laudable objective. But how does the Trump team get there in the face of the general consensus that it is not possible in current, or immediately foreseeable, conditions?
They will, of course, make the perfectly plausible case that since there is a general consensus amongst economists that 1.5 percent is the likely growth rate, that number must be wrong. Economists rarely get things right, especially as a group.
Economic growth is a function primarily of an increase in productivity coupled with an increase in work.
Thus the question is what in the Trumpian game plan gives these folks, such as the Treasury Secretary, the confidence that they will see a steady three percent growth rate?
The answer seems to lie in the belief that tax cuts and tax reform, coupled with a roll-back in regulatory overheads, will lead to a sharp expansion in productivity and work. This, in turn, will give the necessary lift to reach three percent.
The core concept is correct. It is reasonable to project that if people have an incentive to work hard, be more entrepreneurial, and invest capital more efficiently, then growth will occur.
Also, if it pays more to work than to stay at home and collect support payments, this reduces the cost of government and increases work, which leads to growth.
There is a problem with these assumptions, however. Team Trump has a "cart and horse" issue.
They cannot get their tax reform plans and budget to make sense unless they have three percent growth. They cannot get their three percent growth if they do not have in place their tax reform and budget.
What should they do in a situation like this?
They have a magic wand. It is called dynamic scoring.
If they assume three percent growth, their problems of making ends meet disappears - even if they do not have in place the policies they claim will generate three percent growth.
It seems that, like Dorothy in Oz, the folks from New York have noticed "this is not Kansas." It is Washington - a place where you can get anything you wish depending on how you score it.
The Trumpians have assimilated much faster then one would have expected to the gamesmanship of budgeting in Washington.
In this case, all it takes is a magic wand and a three percent solution.
Judd Gregg (R) is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee, and as ranking member of the Senate Appropriations Foreign Operations subcommittee.
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