Trump’s US$4.4 trillion budget would move deficit sharply higher
The new budget proposal would cut Medicaid for the elderly, poor and disabled and move money to building his Mexico border wall and fighting opioid abuse
US President Donald Trump has unveiled a US$4.4 trillion budget for next year that heralds an era of US$1 trillion-plus federal deficits and – unlike the plan he released last year – never comes close to promising a balanced ledger, even after 10 years.
The growing deficits reflect, in great part, the impact of last year’s tax overhaul, which is projected to cause federal tax revenue to drop.
And Monday’s budget proposal - which stands little chance of being enacted in its present form - does not yet reflect last week’s two-year bipartisan US$300 billion pact that wholly rejects Trump’s plans to slash domestic agencies.
Tax revenue would plummet by US$3.7 trillion over the 2018-27 decade relative to last year’s baseline estimates, the budget projects.
Trump is requesting a record US$686 billion for the Pentagon, a 13 per cent increase from the 2017 budget enacted last May.
The spending spree, along with last year’s tax cuts, has the deficit moving sharply higher with Republicans in control of Washington.
Trump’s plan sees a 2019 deficit of US$984 billion, though US$1.2 trillion is more plausible after last week’s budget pact and US$90 billion worth of disaster aid is tacked on.
All told, the new budget sees accumulating deficits of US$7.2 trillion over the coming decade; Trump’s plan last year projected a 10-year shortfall of US$3.2 trillion.
“In one year of working together, we have laid the foundation for a new era of American greatness,” Trump said in the budget message accompanying his spending document.
“America is back to winning again. A great spirit of optimism continues to sweep across our nation.”
The 2019 budget was originally designed to double down on last year’s proposals to slash foreign aid, the Environmental Protection Agency, home heating help and other non-defence programmes funded by Congress each year.
Trump would again spare Social Security retirement benefits and Medicare as he promised during the 2016 campaign.
And while his plan would reprise last year’s attempt to scuttle the Obamacare health law and sharply cut back the Medicaid programme for the elderly, poor and disabled, Trump’s allies on Capitol Hill have signalled there’s no interest in tackling hot-button health issues during an election year.
The proposal would allow US$1.2 trillion in discretionary spending in 2019, including US$23 billion for border security and immigration enforcement, US$21 billion for infrastructure, and $17 billion to combat the opioid epidemic.
But while the budget proposal fully funds Trump’s own priorities, his budget proposes spending US$57 billion less in domestic spending than Congress authorised just three days ago.
The budget plan is the first step toward filling in the details of a two-year budget framework passed by Congress last week, which increased caps on both military and domestic spending.
That compromise – specifically designed to win the support of Senate Democrats and avoid a filibuster – ended an eight-hour partial government shutdown last Friday and signalled a budget truce for at least the next 19 months.
Mick Mulvaney, the former “tea party” congressman who runs the White House budget office, said on Sunday that Trump’s new budget, if implemented, would tame the deficit over time.
Last year, Trump’s budget projected a slight surplus after a decade, but critics said it relied on an enormous accounting gimmick – double counting a 10-year, US$2 trillion surge in revenues from the economic benefits of tax reform.
Now that tax reform has passed, the maths trick can’t be used, and the Trump plan does not come close to balancing.
Trump will propose cutting entitlement programmes by US$1.7 trillion, including Medicare. The entitlement cuts over a decade are included in a White House summary of the budget.
At a time when the prospect of rising annual budget shortfalls has spooked financial markets, the White House said in a statement – without explanation – that its plan would cut the federal deficit by US$3 trillion over 10 years and reduce debt as a percentage of gross domestic product.
Yet, in a break from a long-standing Republican goal, the plan won’t balance the budget in 10 years, according to a person familiar with the proposal.
“There’s still going to be the president’s priorities as we seek to spend the money consistently with our priorities, not with the priorities that were reflected most by the Democrats in Congress,” Mulvaney told Fox News.
The budget proposal assumes that the US economy will ramp up over the next decade to his goal of 3 per cent growth. Economic growth is projected at 3.2 per cent in 2019 and 2020.