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U.S. President Donald Trump's administration has now released its budget plans for fiscal year 2018 .The Trump budget assumes a steady spell of 3 percent GDP growth, which appears to be at odds with the prevailing trends of weakening productivity performance, slowing population growth, and a significantly lower level of labor force participation.A new study by the non-partisan Committee for a Responsible Budget presents a very different outlook for U.S. deficits and debt from the one contained in Trump's budget blueprint. It estimates that under realistic economic assumptions from the CBO, debt in Trump's budget would remain roughly at current levels, rather than falling precipitously (as deficits would remain above 2 percent of GDP, rather than disappear by 2027). In the OMB document, the real interest rate on three-month Treasurys is expected to stay below 1 percent over the decade.With higher interest rates comes a heavier debt-service burden (substantially heavier than in the past, given current debt levels), wider deficits, and higher debt.There seems to be a serious internal inconsistency in the high-growth/low-real-interest-rate scenario presented in Trump's 2018 budget plan.
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