Trump budget shows tiny surplus in 10 years, with rosy economic forecast and trillions in domestic cuts
Trump’s budget blueprint is out. (May 23, 2017) (Sign up for our free video newsletter here http://bit.ly/2n6VKPR)
President Trump in his first full budget says he will produce a surplus in a decade, though his fiscal pathway relies on projections of growth more optimistic than government and private-sector economists expect and deep cuts in anti-poverty programs such as Medicaid.
The budget to be released Tuesday will show that the annual federal deficit, which was $585 billion in the fiscal year that ended Sept. 30, will steadily decline until fiscal year 2027, when the nation will have a $16-billion surplus — the first since the start of the George W. Bush administration, though small in the context of what by then would be a nearly $6-trillion budget.
Nonpartisan budget watchers and even many Republicans are sure to be skeptical. Trump promises to reach balance and even produce a small surplus while he is calling for the deepest tax cuts in history, hefty increases in military and homeland security spending, and no reductions in Medicare and Social Security, the entitlement programs that are a main driver of projected federal debt because of the aging population.
According to budget documents made available to the Los Angeles Times, Trump would balance the budget in two ways. He projects economic growth averaging 3% starting in 2019. That’s at least a full percentage point more than government and private forecasters.
And he would slash all domestic spending by roughly a third, including a $1.7-trillion reduction in projected spending for anti-poverty programs. That includes $616 billion from Medicaid, an entitlement program that he vowed as a candidate not to touch, and the Children’s Health Insurance Program, another entitlement.
Though House Republicans similarly have called for deep Medicaid reductions, many in the party, including governors, are opposed to significantly cutting the program designed to help low-income Americans and the disabled.
Some Republicans already have objected to the scale of other cuts that the White House has advertised in advance, in programs as diverse as State Department operations abroad and community health spending.
Republican resistance especially in the Senate, together with united opposition from Democrats, means the Trump budget is unlikely to get through Congress intact.
It is, however, the fullest picture yet of Trump’s priorities and his vision of the size and role of government. In its broad outlines, that picture suggests an orthodox Republican one: lower taxes, higher military spending and steep cuts in the federal safety net.
Other reductions include $142 billion over a decade from federal college loan programs and $72 billion from disability assistance.
The administration is banking that the nation will get back to average annual economic growth rates of 3% each year, a level that hasn’t been hit in years. The Congressional Budget Office predicts an average of 1.9% over the next decade, which tracks projections of the Federal Reserve and major private-sector economic forecasters.
Whether realistic or not, higher growth estimates allow the Trump administration to project that the government will collect more revenues from taxpayers and spend less on safety-net programs, offsetting the costs of the president’s wish list to hold deficits down.
“We will get back to 3% growth. Everything is keyed towards it,” Mick Mulvaney, the director of Trump’s budget office, said Monday.
“Assuming that 1.9% growth out into infinity for this country is a pessimistic view for this culture and this society, and we refuse to accept that,” he said.
Trump’s budget will propose a nearly $500-billion increase in defense spending over 10 years, while cutting domestic spending by more than $2 trillion. Besides increasing military spending, Trump seeks an additional $200 billion in infrastructure spending over the next several years. Mulvaney described the public works increase as seed money to coax businesses to invest an additional $800 billion in upgrading seaports, the electrical grid and other major infrastructure over the next decade.
The military spending increase will please Republicans who argue that the United States needs to counter the military investments of adversaries China and Russia. Rep. Mac Thornberry of Texas, the Republican chairman of the House Armed Services Committee, said, “There is real damage that needs to be repaired, and our adversaries are not sitting still.”
Trump is also proposing $19 billion over 10 years in federal subsidies for paid leave for parents with newborns, a plan pushed by Trump’s daughter Ivanka.
The healthcare spending cut could hit especially hard in California, where Obamacare added about 5 million people to the ranks of the insured. Most of those are in the state’s Medi-Cal program, which now covers 13.5 million people — more than 1 in 3 Californians. Advisors to Gov. Jerry Brown have estimated that federal healthcare cuts could cost the state $18.6 billion a year by 2027.
Other changes would tighten qualifications for nutrition assistance commonly known as food stamps, and shrink the Children’s Health Insurance Program and Social Security Disability Insurance. Cuts also would end federal funding for school lunches and Habitat for Humanity, according to administration officials.
Trump’s proposal is “a taxpayer-first budget,” Mulvaney said, that will look to cancel or starve programs that the White House sees as ineffective.
“It is the first time in my memory that a budget has actually been written from the perspective, through the eyes of the people who pay taxes, as much as the folks who receive the benefits,” he said.
“I can’t look taxpayers in the eye anymore and say, ‘You have to keep paying for this.’ We can’t afford it and we cannot justify to the people who are paying the taxes.”
Yet many beneficiaries of the targeted programs are working-class Americans from whom Trump drew so much political support. The scale of proposed Medicaid cuts would probably lead to widespread coverage losses, according to independent experts, some state officials and advocates for children, the elderly and others who rely on the 52-year-old program.
The House bill to roll back Obamacare — which Trump enthusiastically backed — would lead to about 10 million poor people losing insurance, according to the nonpartisan Congressional Budget Office.
Medicaid is a pillar of the health law’s expansion of insurance coverage and has helped drive a historic drop in the nation’s uninsured rate. Nationwide surveys suggest at least 20 million previously uninsured Americans have gained coverage since 2014.
The law makes hundreds of billions of dollars of federal aid available to states to extend Medicaid coverage, including to low-income childless adults, a population that had been largely excluded from the program. Historically it was limited to poor children, pregnant women, the elderly and people with disabilities.
A growing body of evidence suggests the Medicaid expansion has improved public health. But conservative Republicans have been trying for decades to cut back the program, arguing it is ineffective and too expensive.
Trump, however, had promised not to cut such programs.
In May 2015, just before he entered the fight for the Republican nomination, Trump wrote on Twitter that he “was the first & only potential GOP candidate to state there will be no cuts to Social Security, Medicare and Medicaid.”
Healthcare cuts in the budget would reduce funding in many states that voted decisively for Trump — such as Ohio and West Virginia — including for opioid addiction treatment.
The budget “betrays millions of struggling Americans who voted for the president,” said Robert Greenstein, head of the liberal Center on Budget and Policy Priorities, adding that Trump’s proposals would “make inequality and poverty significantly worse, while allowing deficits, when honestly measured, to soar.”
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for fiscal restraint, criticized Trump for failing to propose the difficult, major structural changes needed to financially fix the major entitlement programs other than Medicaid — Social Security and Medicare — and constrain the projected growth of federal debt in the long term.
As baby boomers reach retirement age, the U.S. population is getting older and living longer, MacGuineas said, which means that to bring Social Security costs under control, steps such as gradually raising the eligibility age, slowing benefits for people with more wealth or raising the payroll tax cap, need to be on the table.
The United States has had such high rates of economic growth only during a demographic shift, such as the decades when baby boomers were entering the workforce and in their prime working years, MacGuineas said.
“These gauzy economic predictions will end up resulting in enormous piles of debt,” she said.
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