Summers: Budget plan has ‘egregious’ accounting error

Summers: Budget plan has ‘egregious’ accounting error
© Greg Nash

Former Treasury Secretary Larry Summer on Tuesday said that President Trump’s budget relies on an “egregious” accounting error to make its numbers add up.

In a Washington Post op-ed, Summers noted that the budget seems to double-count the economic benefits from tax reform.

Though GOP plans for tax reform are still far from complete, the budget assumed the reform would be revenue-neutral. Proponents of the reform have said that the economic benefits from cutting taxes would boost the economy, which would be a key element of keeping the reform neutral.

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But the budget also assumes high levels of economic growth outside the framework of the tax reform and counts the revenue benefits toward its totals.

“This is a mistake no serious business person would make. It appears to be the most egregious accounting error in a presidential budget in the nearly 40 years I have been tracking them,” Summer wrote.

The budget estimates that the effects of economic feedback would add up to over $2 trillion over the course of a decade.

"How could the secretary of the Treasury, the director of OMB and the director of the National Economic Council allow such an elementary error?" Summers asked.

Treasury Secretary Steve Mnuchin said the claims were off base because the tax reform is still in flux.

"We felt it was premature to put any changes in the budget from taxes since we're not far enough along to estimate what that plan will be,” Mnuchin said at the Peterson Foundation Fiscal Summit.

Far from assuring the tax reform would be revenue neutral, however, he offered only assurances that the plan would not cost $4 trillion to $5 trillion, as some economists have estimated.