Donald Trump's budget plan depends on a level of economic growth rarely seen so far this century.
His supporters say President Obama was equally optimistic about growth in his budget proposals. But they're wrong.
Trump's budget forecasts 3% growth every year from 2021 to 2027. Obama's budgets never assumed such strong economic growth over an extended period of time.
"There's no comparison," said Mark Zandi, chief economist at Moody's Analytics. "The Obama projections were very similar to the Congressional Budget Office forecasts at that time. The Trump economic projections are pure fiction, not in line with any model of how the economy works."
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Reaching 3% growth would be a significant achievement. Growth has averaged less than 2% a year since 2001. It only hit 3% in 2004 and 2005 as the housing bubble inflated. The Trump forecasts are not only more bullish than recent history, they're well above the 1.9% long-term annual growth rate forecast used by the CBO.
Budgets always include forecasts for each of the next 10 years. They're key to the budgeting process since they indicate how much tax revenue the government expects to collect.
It is true that Obama's budget plans called for some years with growth above 3%, a rate the economy never achieved during his time in office. But those were forecasts for a short-term spike in economic growth. For the most part, Obama's budget counted on growth of about 2.3%.
"I went back and looked at some of the economic assumptions that the Obama administration made in its first couple of years, and I want to say, on a couple of different occasions, their assumed growth rate was more than 4.5%," said Mick Mulvaney, director of the Office of Management and Budget, in a briefing Tuesday. Obama only forecast growth above 4.5% one time, although he was above 4% on several occasions.
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"I don't recall the wailing and gnashing of teeth even though Obama's policies failed to get us over the 3% low hurdle in a single year," Stephen Moore wrote in an opinion piece for The Hill this week. Moore was a Trump economic adviser during the campaign who now is an economic analyst for CNN.
Trump's supporters are right that Obama's projections did prove to be too optimistic. For example, his first budget plan in early 2009 forecast 4.6% growth by 2012, his most bullish estimate. Actual growth that year came in at less than half of that.
But that 2009 forecast was roughly in line with CBO's forecast at that time.
Obama's more optimistic projections were for the period when the economy was still climbing out of the depths of the recession and had room to grow. Today the economy is at close to full employment and will need population growth or productivity gains to grow faster. Economists have doubts that either is possible, even if Trump's tax cuts are approved.
"We'll be lucky to have 2%," said Zandi.
