On having your cake and eating it too…

“You can’t have your cake and eat it too” is a way of saying you can’t have it both ways. You can keep your beautiful cake to admire it but, if you do, you can’t eat it. If you eat it, you will no longer have it to admire. It’s one or the other.

The same thing applies to money. You can’t keep your money and spend it too. Which leads us to the Trump budget.

Team Trump is claiming that the tax cuts in its budget will pay for themselves. In other words, there will be no reduction in government revenue because the cuts will stimulate the economy to the extent that there will be as much revenue collected at the lower rate as there would have been without the cuts.

This is a bit dubious. In the past tax cuts have induced growth that paid for up to 50 percent of the cut, but never 100 percent. Still, let’s go with it and assume that the cuts will pay for 100 percent of the reduction in rate with an increase in the economy.

The great benefit here, according to the administration, is the cuts won’t increase the national debt. The same tax revenue (it’s a couple trillion over ten years) can be spent without going deeper in the hole. Okay, that makes sense.

Later in the same budget, however, the administration says it will use that two trillion associated with its projection of economic growth to reduce the debt.

Now you see the problem. You can use the additional tax revenue to “pay for” the tax cut and maintaining spending or you can use it to reduce the national debt. You can’t do both. In other words, you can’t have your cake and eat it too.

There is a detailed description of the problem here.