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ANALYSIS

Donald Trump’s first budget blueprint is a macro-economic scandal. It does nothing to contain the spiralling costs of middle class entitlements and pensions that threaten the United States with slow atrophy, or to tackle America’s productivity crisis.

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The brutal document sent to Congress ring-fences Medicare, social security, and the giant programmes that make up US$2.5 trillion of mandatory spending, and it raises defence outlays by US$54 billion, or 10%. These do not in themselves lift the country’s declining trend growth rate.

The Congressional Budget Office estimates that such a course would drive the budget deficit to $1 trillion in short order, and to 5% of GDP on a structural basis by the mid-2020s even if all goes well.

President Trump has forecast growth of 3% or 4%. From what we have seen so far, his plan would leave the U.S. economy mired in stagnation with a long-term speed limit sliding ineluctably from 1.5% to nearer 1%. There may be an immediate sugar rush from cyclical effects, but it would burn out with no lasting improvement.