Larry Kudlow, the director of the National Economic Council, said that the deficit is “coming down rapidly” in a Friday morning appearance on Fox Business.
The problem for President Trump’s top economic adviser is that the deficit is actually rising.
“As the economy gears up, more people working, better jobs and careers, those revenues come rolling in and the deficit, which was one of the other criticisms, is coming down,” Kudlow told host Maria Bartiromo. “It’s coming down rapidly. Growth solves a lot of problems.”
However, the deficit is actually increasing, and is projected to do so well into the future. The Congressional Budget Office (CBO) projected as of April 2018 that the FY 2018 deficit is $804 billion. Fiscal Year 2017’s deficit was $666 billion, increasing from $586 billion in FY 2016. This leads to an even worse projection for the federal debt. The CBO concluded in a report earlier this week: “At 78 percent of gross domestic product (GDP), federal debt held by the public is now at its highest level since shortly after World War II.”
One of the primary drivers behind the terrible deficit and debt projections is the Republican tax cut bill — the six-month anniversary of it being signed into law was the occasion for Kudlow’s interview on Fox Business — and the only glimmer of hope in the CBO’s analysis is the expiration of the tax cuts in 2026. But the White House and Republicans in Congress insist they won’t let the tax cuts expire. Instead, they’ve promised to extend them.
Kudlow also dismissed critics who apparently said “we could never get to 3 percent growth,” something that Donald Trump Jr. also argued in a tweet which also claimed “I don’t think Obama ever broke 2 percent.”
In 2014, as the Obama administration was pulling the country out of the Great Recession, growth hit as high as 5.2 percent in a quarter.
That Kudlow does not present the best economic arguments is not shocking. He recommended buying stocks in September 2008, denied the existence of the housing bubble in 2005, lauded the “Bush Boom” on the eve of the Great Recession, and argued that unemployment benefits make people not want to work (which is not true).
He also said the war in Iraq would be a huge boon to the American economy, even though the trillions it added to the deficit (not to mention the tens of thousands of lives it cost) helped to put future administrations, including the one he helps to lead, in a situation where boosting the deficit with tax cuts is even more perilous thanks to trillions more in debt.