Donald Trump’s speech at the New York Economic Club on Thursday was quite brilliant, powerfully delivered and even laced with the kind of soaring “capitalist prosperity” rhetoric that has not been heard from GOP politicians since Jack Kemp.

I was all set to say as much at 7AM on CNN’s “New Day” show. But the segment host, Alisyn Camerota, averred that first there was some more important business pending. That is, what did I think about Donald Trump’s “birther” views, and wasn’t that just as important as his economic speech?

That’s right. We have an economy that is on death’s door after 30-years of economic mis-governance by the Wall Street/Washington elites, but cable news was obsessed by the possibility that the Donald’s uuge comb-over might be hiding a tin foil hat!

So I thought it pertinent to observe that Barack Obama was born somewhere, had been elected President, served eight years and was on the way out—but that he had left behind an even bigger economic mess than he inherited. In fact, the millions of families in Flyover America who have lost good jobs or seen their wages eroded by inflation or have had their savings crushed on the Fed’s zero bound do not care a whit about where our 44th President was born, but they most surely are interested in what is going to be done to change the current ruinous regime.

At length, we did get to Trump’s economic plan which among other things proposes to cut Federal taxes by $4.4 trillion over the next 10 years. I am more than ok with that because it at least recognizes the supply side principle that capitalist prosperity cannot be revived without lessening the heavy-hand of the state on incentives for work and enterprise in the private economy.

Besides, by the lights of CBO’s so-called “baseline” projections, Federal revenues under current policy would total $42 trillion over the next decade. So that means Trump’s tax cut is not all that radical, and at approximately 10% of the existing base is actually far smaller than the 25% revenue reduction embedded in the 1981 Reagan tax cut.

But what is profoundly disappointing about the Trump campaign’s stab at a semi-coherent economic plan is that it is a dog’s breakfast of some plausible policy ideas, really bad fiscal math and a relapse to the discredited, 35 year-old dogma of sweeping income tax cuts which pay for themselves.

They don’t. As the great Dwight D. Eisenhower proved in the context of the modern welfare and warfare states, politicians have to earn the right to favor the voters with tax reductions by first dispensing the pain of spending cutbacks and without an exemption for the military-industrial complex, either.

Following those precepts, Ike balanced the budget several times; generated an average deficit of less than 1% of GDP during his tenure; shrank the defense budget by 33% in real terms; and presided over the strongest 8-year growth rate (about 3.3%) of any post-war GOP president, including Ronald Reagan.

By contrast, the Reagan White House—me included—fell for the theory of “dynamic scoring” and that the big cuts in the income tax rates would partially pay for themselves via revenue “flowback.”

Back in those days the latter was expressed in an economic forecast known as Rosy Scenario, which assumed that in response to the supply side tax cuts, the US economy would get up on its hind legs and leap forward at a real GDP growth rate of more than 4% per year, and as far as the eye could see.

What happened instead, of course, is that the US economy plunged into the drink of the deep 1982 recession and the Federal deficit soared to 5% of GDP—a truly shocking outcome back in those innocent days when the old-time fiscal religion still had roots inside the beltway. And it would have also caused enormous economic havoc had not the Gipper’s advisors—me included—talked him to signing three tax bills over 1982-1984 that recaptured roughly 40% of the revenue loss from his cherished tax cuts.

Even then, the public debt grew by 250% during Reagan’s eight years—or by more than under any peacetime President in American history. Yet even to this day the GOP politicians and their economic advisers profess a case of heavy duty amnesia about what happened, claiming that real GDP grew by upwards of 4.5% and that these results were proof positive that “dynamic scoring” of tax cuts is valid.

Worse still, they appear to have convinced Donald Trump of this same fallacious revisionist history because it was embedded at the core of the Thursday speech’s fiscal math. To wit, Trump claimed that $2.6 trillion or 60% of the revenue loss from his $4.4 trillion tax cut would be recouped by, yes, 4% economic growth as far as the eye can see.

No muss, no fuss, and no need for heavy duty spending cuts. In fact, the Donald claimed that the only inconvenience that would be requested of the beltway racketeers and the 160 million US welfare state beneficiaries was “fraud, waste and abuse” savings of one penny per dollar of non-defense, non-entitlement spending.

Let’s see. The part of the budget that Trump apparently conceded was fair game for “cuts” amounts to about $600 billion of non-defense appropriations. So at a penny on a dollar, the savings would represent the grand sum of $6 billion per year.

Never mind that this amounts to just 13 hours of total Federal spending at the FY 2017 run-rate of $450 million per hour, and that it would off-set exactly 0.14% of the proposed tax cut. All the rest is economic magic, apparently.

Here’s the thing. There actually was a “reflow” of higher growth from the Reagan tax cuts, and I have no doubt there would be from the Trump plan, as well. But the skunk in the woodpile is that like back then, the “reflow” is already built into the CBO baseline budget. You can’t count economic growth twice.

The problem during the Reagan era is that we over-estimated nominal GDP growth by 15% and neglected to average in the negative real growth numbers posted during the recession which preceded the 4.5% growth in 1983-1986. Consequently, the inherited Jimmy Carter budget baseline dramatically overstated the revenue base from which the Reagan tax cuts were extracted.

And that’s the case in spades today with what might be called the Clinton-Bush-Obama baseline. The Keynesian apparatchiks who man the CBO forecasting machinery currently assume that there will never by another recession in all of future history, world without end.

Accordingly, as of FY 2026 under the current 10-year budget baseline, the US will have gone 207 months without a recession!

That’s 3X the average post-war business cycle expansion of 61 months, and 2X the longest ever expansion of 119 months which occurred during the Greenspan boom of the 1990’s. Needless to say, the latter proved to be artificial and unsustainable when it ended in the dotcom crash, the housing bubble and the great financial crisis of 2008.

Beyond that, the other great lesson of the 1980s is that fiscal outcomes are overwhelmingly driven by nominal GDP growth, not real GDP. That’s because Uncle Sam principal revenue sources—income and payroll levies—tax nominal income, regardless of whether it is “real” or not by the lights of the Washington statistical mills.

The fact is, after two decades of massive monetary stimulus on a worldwide basis, and a monumental expansion of global debt from $40 trillion to $225 trillion, we are now in the payback cycle and a historically unprecedented era of global deflation. Accordingly, nominal GDP growth has been forced toward the flat-line everywhere, and has virtually no prospect of escaping it.

To wit, the US economy has clearly rolled over and will be soon succumbing to recession after nearly 90 months of tepid recovery. That means that today’s $18.4 trillion of nominal GDP will likely represent a peak-to-peak growth rate of just 2.7% per annum from the prior peak of $14.7 trillion of nominal GDP in Q4 2007.

Alas, CBO assumes 4% nominal GDP growth through 2026, and that is exactly where the laws of compound arithmetic wreak havoc—just as they did back in the Gipper’s time. Even if you assume 3% per annum nominal GDP growth with another recession averaged in, the CBO baseline overstates nominal GDP by $12 trillion, wage and salary income by $5 trillion and income and payroll tax revenue by $2 trillion during the decade ahead.

In short, the “flowback” and then some is already embedded in the CBO baseline. That is, any additional “growth” stimulated by the Trump tax cuts will be needed just to recover the phantom revenues served up by CBO.

So whether they intend it or not, the Trump campaign advisors are helping the candidate to hide the ball on spending cuts. Given the fact that Trump would inherit a social security system that will be less than 9 years from insolvency, as I have demonstrated in Chapter 8 of Trumped!, and which will cost nearly $1 trillion in FY 2017, it is just absurd to say that entitlements can be exempted from cuts.

That’s especially the case because $950 billion is just the current—and rapidly growing—cost of cash benefits under OASDI. If you add in medical entitlements you get another $1.2 trillion; and then there is a further $304 billion for means tested entitlements like food stamps, the earned income tax credit, supplemental security income, and unemployment insurance.

And, as the man says on late night TV, that’s not all! There is also $108 billion of annual veterans' entitlements that Trump apparently intends to enhance and $164 billion of Federal retirement benefits—a substantial chunk of which goes to military retirees.

I tried to cut the latter once, and was warned that the Oval Office door would be taken down by a fire-axe if the plan even made it to the president’s desk.

So whoever convinced Donald Trump that upwards of $2.7 trillion of entitlement spending can be exempted from cuts, and that the defense budget actually needs to be increased should be charged with wanton malpractice.

The US spends more than $700 billion per year on the Pentagon and related international security and domestic spying operations. That compares to Russia’s military budget of $40 billion, meaning that Vlad Putin has all of 3 weeks' worth of US national security spending to threaten the entire free world.

And that’s not all. From my 19th floor apartment in New York City, I can actually see Russia. Not exactly in the manner that Sarah Palin espied it from Alaska, but actually in a far more relevant manner.

As it happens, the GDP of the New York City metro area is about $1.6 trillion. Russia’s GDP is about $1.4 trillion, and consists largely of a giant hydrocarbon patch, a goodly number of nickel coal, iron ore and other mineral mines and about 100 million acres of wheat and grain fields.

That’s about the extent of it. Putin may be a grand larcenist in his own back yard, but he’s no threat to a single citizen in America—or Europe for that matter. The Donald’s better idea would be to make a Peace Deal with Putin, dissolve the utterly useless and unnecessary cold war relic of NATO, and then start to drain the swampland of waste where the Pentagon has resided since 1948.

Yes, and when it comes to cutting entitlements, a good place to start would be to “fire” from the rolls the 50,000 millionaires who get Social Security. And then to clawback a goodly share of the cash and Medicare benefits received by the 25% of OASDHI recipients with household incomes of more than $50k per year.

There is much more in the Trump economic plan that needs “some work,” as they say. We will address some of those items next week. But for now let’s just say: Enough of the patented beltway economic magic that has pushed the nation to the fiscal brink.

Indeed, hiding the ball on the massive budget cuts that will be needed to finance vitally necessary tax cuts will only insure that that nation’s sputtering remnant of a capitalist economy will be crushed by the Welfare and Warfare states on which the Imperial City feeds.

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David Stockman was the Director of the Office of Management and Budget under President Ronald Reagan. To read more of his insights, CLICK HERE NOW.