Forecast of weak economic growth raises big questions about Trump’s populist agenda

By Damian Paletta, Ana Swanson and Max Ehrenfreund –The Washington Post
President Trump’s budget would not add to economic growth or eliminate the deficit in coming years, the nonpartisan Congressional Budget Office said Thursday, casting doubt on a plan the White House has touted as central to achieving the president’s domestic agenda.

The CBO projected that the economy would grow at only 1.9 percent under the White House’s plan — far below the 3 percent goal the administration continued to outline as recently as Thursday. It also warned that contrary to White House claims that deep cuts to the safety net in the budget would lead to a financial surplus in a decade, the deficit would actually be $720 billion.
The report was one of several big questions that emerged Thursday about whether Trump would be able to deliver on the central promises of his populist agenda for governing.
He had pledged to replace President Barack Obama’s Affordable Care Act with a better policy that guaranteed “insurance for everybody.” But Republican Senate leaders on Thursday were advancing a proposal — its fate uncertain — that would still swell the nation’s ranks of the uninsured by tens of millions.
Trump also faced questions about whether he would follow through on repeated promises to stop foreign competitors from “killing our companies and our workers” by dumping steel at ultra-cheap prices onto the global market — and he repeated to reporters traveling on Air Force One during his trip to France that “it’ll stop.”
Yet he has been promising action for weeks, and Commerce Secretary Wilbur Ross would only tell a meeting of senators on Thursday that he planned to provide options to Trump soon.
Trump’s combination of setbacks and delays on key policy initiatives highlight how the president is struggling to advance a populist vision of governing in a Republican Party that historically has not been receptive to such an approach.
With his budget and health care, Trump is falling in line with some of his party’s most conservative voices, even if the policies threaten to harm many of the working-class voters who elected him.
On trade — an issue where he could act unilaterally — Trump is facing opposition from companies, foreign allies and numerous White House advisers who say restricting imports could hurt U.S. industry broadly far more than it helps steel companies.
The delay on steel imports follows a decision not to label China a currency manipulator as he advocated during the campaign, and a last-minute decision not to abandon the North American Free Trade Agreement, which he had often maligned.
“He certainly, as a president, has not been able to articulate a coherent agenda that responded to the concerns of the country, or the concerns of the people who elected him. A lot of them were low-income blue-collar whites, and his agenda is not addressing those concerns or those problems,” said Peter Wehner, a former speechwriter for Republican president George W. Bush. “House and Senate Republicans weren’t in tune with what he was running on either, so that was always going to be a problem.”
As it emphasized progress on health care and trade, the White House dismissed the CBO report as flawed because it had earlier misjudged how many people would sign up for the Affordable Care Act.
“It’s not surprising that a bureaucracy which underestimated by more than 100 percent Obamacare participation would also underestimate the economic benefits of MAGAnomics,” Office of Management and Budget spokesman John Czwartacki said, using a new buzzword for the administration’s economic policy that stands for “Make America Great Again”-economics. “They are great people, but are just wrong on this.”
Building a coalition
The CBO report Thursday creates new complications for Republicans who need to build a coalition of conservatives and moderates to vote for a single budget proposal, the first step for what the GOP hopes will be an ambitious fall of policymaking.
By rejecting the White House’s declaration that large-scale spending reductions and unspecified tax cuts will lead to economic growth, the CBO could make it harder for this coalition of GOP lawmakers to band together.
Some key elements of the White House’s agenda rely on Congress’s ability to pass a budget. Only 50 Republicans are needed in the Senate to approve a tax plan if it is part of an already authorized budget plan, through a process known as reconciliation. If Congress does not pass a budget plan, however, the Senate will need 60 votes to authorize tax cuts — and the GOP has only 52 seats.
The CBO’s projections came with a caveat. It said the lack of detail the White House has provided about its plans — primarily its plan to overhaul the tax code — made it difficult for the agency to determine what the economic impact of these ideas would be. The White House has put out only a sparse, one-page blueprint for overhauling the tax code.
“The President’s proposals would affect the economy in a variety of ways,” the CBO wrote in its assessment. “However, because the details on many of the proposed policies are not available at this time, CBO cannot provide an analysis of all their macroeconomic effects or of the budgetary feedback that would result from those effects.”
If the CBO, which is run by a Republican appointee, raises questions about the lack of details in the White House’s tax plan now, it could serve as a warning to the White House and other Republicans as they try to design a more comprehensive plan in the coming months that is still expected to rely in large part on the assumption that the economy will grow markedly because of large tax cuts.
Overall, the CBO said the White House’s plan would cut government spending by $4.2 trillion over 10 years compared with existing law.
The White House seized on this element of the CBO’s assessment.
“This administration is committed to making the necessary investments to restore our military, secure our borders and modernize our infrastructure,” OMB spokeswoman Meghan Burris said.
The White House’s budget proposal was released in May, to set government spending levels for the year that begins Oct. 1. It essentially makes recommendations to Congress, which is responsible for drawing up the budget and appropriating funds to use. Congress often uses the White House’s budget proposal as a set of guidelines.
‘Whole bunch of home runs’
Trump’s allies point to several successes, including reducing regulations and making good on his promises to withdraw from international agreements the he argued subordinated U.S. interests — the Trans-Pacific Partnership and the Paris climate accord.
“He’s hit a whole bunch of home runs,” said Larry Kudlow, who has advised the president on taxes.
Those initiatives have not required congressional approval. “Within the areas that the president has control over . . . he is doing a magnificent job,” said Diana Furchtgott-Roth, who served as the Labor Department’s chief economist under President George W. Bush.
Meanwhile, Trump suggested Wednesday once again he is planning to take action to restrain imports of steel into the U.S. market, telling reporters aboard Air Force One that China and other countries were “dumping steel.”
“We’re like a dumping ground, okay? They’re dumping steel and destroying our steel industry. They’ve been doing it for decades, and I’m stopping it,” he said.
When asked if he was considering tariffs, the president replied, “There are two ways — quotas and tariffs. Maybe I’ll do both.”
Trump’s comments came as company executives and foreign leaders eagerly await a decision on two separate investigations that the Trump administration launched in April, into the potential for imports of steel and aluminum to threaten U.S. national security.
If the Trump administration finds that imports are threatening security, it could take broad action to limit shipments through tariffs or quotas — an action that could spark retaliation from trading partners and cause prices to spike throughout the supply chain for the many U.S. industries that use steel.
Ross had said that the report’s findings would be available by the end of June. But a decision has been delayed because of pushback from steel-using industries in the United States and members of the administration who fear igniting a trade war.
Meeting with senators on the Senate Finance Committee on Thursday, Ross said he would present Trump with a menu of options next week for how he could act, the lawmakers said. Ross suggested different countries could be treated differently under any restrictions, and he singled out Canada, which he said had not dumped an oversupply of steel, unlike other countries, a person in the meeting said.
Sen. Pat Roberts (R-Kan.) gave Ross a copy of a letter from agricultural groups at the meeting that warned of the potential retaliatory blowback that could occur if the White House cracks down too harshly on steel.
In a letter sent Tuesday, 18 agricultural groups, including the National Pork Producers Council, argued that the restrictions on steel and aluminum could result in other countries retaliating by restricting their products, an outcome that they said would be “disastrous for the global trading system and for U.S. agriculture in particular.”

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