Trump ditches pledge to cut deficit

Congress passed a highly profligate budget, but Trump wants more. Emily Hohler reports


Donald Trump unveils his $4.4trn budget
(Image credit: Copyright (c) 2018 Shutterstock. No use without permission.)

Congress passed a highly profligate budget, but Trump wants more. Emily Hohler reports.

President Donald Trump unveiled a $4.4trn budget plan on Monday that proposes "steep cuts" to social security benefits for the poor and middle class, and a big boost for the military, ditching last year's pledge to balance the federal budget, say Andrew Taylor and Martin Crutsinger in The Washington Post.

While all presidential budgets are pretty irrelevant since they stand little chance of being enacted in law, Trump's plan was "dead before it landed", coming just three days after lawmakers approved a two-year plan that boosts federal spending by $300bn, increasing funding for domestic programmes by $128bn and the military budget by $160bn.

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The White House also used Monday's event to promote Trump's long-awaited infrastructure plan: to put up $200bn of federal funds over ten years in order to leverage a further $1.3trn from state and local governments and the private sector. This is a "scam", says Lindsay Koshgarian in Fortune. Just as Mexico won't pay for Trump's border wall, private investors won't pay for his roads and bridges. They want to make money. Where they do provide funding, costs will be passed on to the public in the form of tolls or fees.

As for the bipartisan budget deal, it is "a huge evasion of responsibility", says Robert Samuelson in The Washington Post. "Neither party will make the unpopular choices necessary to pay for an ageing society and essential government." The independent Committee for a Responsible Federal Budget predicts that the agreement will see the federal debt grow by around $1.7trn over the next decade.

These costs come on top of the estimated $11trn of pre-existing deficits Trump inherited. But for politicians, ignoring "out-of-control deficits" seems to carry "few economic or political costs". The extra borrowing hasn't sent interest rates "sky-high". Foreigners still seem to regard US Treasuries as safe financial assets. Recent polls, adds William Galston in The Wall Street Journal, signal that voters are increasingly unconcerned too.

Deficit spending can work, says The New York Times: for investing in infrastructure, rebuilding after disasters and paying for wars. But to use it to fuel the economy when unemployment is about half what it was in 2012 and corporate profits have "soared" is madness.

"Many economists believe the tax cuts and spending increases will provide massive fiscal stimulus at precisely the wrong point," agrees Galston boosting growth now, but risking inflation and higher interest rates later, which could "choke off growth and lead to the next recession". When that happens, the government will have few "tools left to fight it". Voters have said they want more government. Leaders should tell them how much that would cost, or "our fiscal policy will remain on a collision course with reality".

Kim's Olympic-standard propaganda campaign

The "gold medal" for propaganda at the Winter Olympics goes to Kim Jong-un, says the Financial Times. The North Korean dictator sent an invitation via his sister, Kim Yo-jong, for President Moon Jae-in of South Korea to attend a summit in Pyongyang. Moon was "too smart... to take the bait", suggesting Pyongyang talk directly with the US instead, says Walter Russell Mead in The Wall Street Journal. Nevertheless, Kim Yo-jong's meetings with Moon are the "highest level contact between the Koreas in years".

Meanwhile, Mike Pence, the US vice president, told The Washington Post that the Trump administration was prepared to hold talks with North Korea, describing its approach as "maximum pressure and engagement at the same time". Nonetheless, harnessing the Olympics-driven "feel-good spirit" between the two Koreas to create dialogue over North Korea's nuclear weapons is "still a long shot".

There is little real doubt that Kim is trying to play South Korea, says Roula Khalaf in the Financial Times. His strategy is to "drive a wedge" between the US and its ally. US military planners seem convinced they have "a bloody nose' option that would hit some of North Korea's missile and nuclear weapons without sparking massive retaliation". South Korea, which would bear the brunt of any reprisals, understandably prefers to explore any "diplomatic opening".

Meanwhile, Tokyo, Washington and Seoul's ally in dealing with Pyongyang, made it clear it has "no intention of backing down from its hard-line policy", says Tomohiro Osaki in the Japan Times. In response to Kim's words about "further livening up the warm climate of reconciliation and dialogue", chief cabinet secretary Yoshihide Suga said his "gushing words" weren't "fooling Toyko". Recent military threats show "the reality of North Korea. We cannot fall for its charm offensive".

Emily Hohler

Emily has worked as a journalist for more than thirty years and was formerly Assistant Editor of MoneyWeek, which she helped launch in 2000. Prior to this, she was Deputy Features Editor of The Times and a Commissioning Editor for The Independent on Sunday and The Daily Telegraph. She has written for most of the national newspapers including The Times, the Daily and Sunday Telegraph, The Evening Standard and The Daily Mail, She interviewed celebrities weekly for The Sunday Telegraph and wrote a regular column for The Evening Standard. As Political Editor of MoneyWeek, Emily has covered subjects from Brexit to the Gaza war.

Aside from her writing, Emily trained as Nutritional Therapist following her son's diagnosis with Type 1 diabetes in 2011 and now works as a practitioner for Nature Doc, offering one-to-one consultations and running workshops in Oxfordshire.