President Trump’s 2018 spending plan landed in front of the House Budget Committee on Wednesday, where Office of Management and Budget Director Mick Mulvaney heard plenty of criticism of the blueprint — mainly from Democrats, with one outspoken exception.
GOP Rep. Mark Sanford — a fellow South Carolinian who belongs to the House Freedom Caucus, the hard-right group Mulvaney helped found — used his five minutes of questioning at the hearing to sharply challenge the bedrock of the Trump budget: an economic growth assumption of 3 percent, one that is sharply more optimistic than those projected in recent Obama administration budgets or by the nonpartisan Congressional Budget Office.
The difference between the 1.9 percent growth contemplated by those sources and the 3 percent growth contemplated by Trump and Mulvaney generates enough new revenue to allow the new presidential budget to balance within 10 years. But Sanford called it something else: “a lie.”
“I have looked every which way at how you might get there, and you can’t get there,” Sanford said, after a short preamble where he praised the administration for seeking to balance the budget and slash taxes and spending. “I think it is just disastrously consequential to build a budget on 3 percent growth. The Bible says you can’t build a house on a sandy foundation. What it does is it perpetuates a myth that we can go out there and balance a budget without touching entitlements. It’s not only a myth, it’s frankly a lie, and if it gets started at the executive branch level it moves from there.”
“What this does is it [prevents] real debates from happening,” Sanford continued. “Legitimately, myself and Democratic colleagues can see things quite differently, but for us to have a real debate, we have to base it on real numbers. I would also say it’s important because I’m a deficit hawk, as you well know, and if you’re wrong on these numbers, it means all of a sudden we’ve created a $2-plus trillion dollar hole for our kids and grandkids here going forward.”
From there, Sanford trotted out various data points to support his claim. He called the assumption at odds with the historical record — pointing out that the current economic expansion of 94 months has already long outstripped the average American economic expansion: “But what you presume in this budget is not only will we not have a recession — though we’re in the third longest economic expansion in history — but it’s going to keep going for another 214 months. It’s not only unprecedented; I would think that to be unreasonable. It assumes that the stars perfectly align with regard to economic drivers.”
He moved on the underlying fundamentals of economic growth: workforce, investment and productivity. To drive 3 percent growth, Sanford said, capital formation would have to rise to levels not seen in the U.S. since the mid-1970s, and that baby boom retirements stand to exert a huge drag on savings. Labor participation growth would have to go to 1980s levels, he said — a time when many women were going to work for the first time, and even returning to a ’90s level of labor participation would only nudge the overall economic growth needle.
“It would require either radically opening immigration or a radical change to demographics as we are having 10,000 baby boomers retiring each say,” Sanford said. “If you look at productivity growth, it would require numbers, again, that we haven’t seen since the golden days of 1958 to 1967 — in the final wave of electrification, consumer appliances, and the completion of the highway system — to achieve what we’re seeing. Even if we went to 1990 numbers, we would only see one-quarter of what is necessary to achieve 3 percent growth.”
Mulvaney got barely a handful of words out in response before questioning moved on, but he defended the budget’s growth assumptions in remarks to reporters Tuesday at the White House — what can be considered a prebuttal to Sanford.
“We have been attacked, stunningly, by some folks on the left and even in the mainstream who say that that’s an unreasonable assumption,” Mulvaney said. “We should stop and think how absurd that is to think that 3 percent growth in an American economy is to some people an absurd assumption. It used to be normal. Ten years ago it was normal. In fact, it’s been normal for the history of the country.”
The 1.9-percent growth assumptions of the CBO and the Obama administration, he added, “are something we simply reject.”
“That is a pessimistic look at what the potential for this country and for what this country’s people is,” he continued. “We reject that pessimism.”
Mulvaney added: “By the way, if you don’t, the budget will never balance. If you assume 1.9 percent growth, my guess is you’ll never see a balanced budget again. So we refuse to accept that that’s the new normal in this country. Three percent is the old normal. Three percent will be the new normal again under the Trump administration.”
In an interview after Wednesday’s hearing, Sanford said that he simply could not accept blind faith as a basis for the federal budget and suggested that he would not be inclined to support any budget that adopts a similarly rosy view of America’s economic future given its aging and slow-growing workforce and stagnant productivity gains.
“Whatever your budget is, just base it on real numbers and then let’s have a food fight,” he said. “But let’s not base it on fooling the American public into believing that you can do all this because we’re going to have a Goldilocks economy that we’ve never seen before.”