Five Things to Look for in the President’s New Budget
While the budget won't reflect this week's congressional budget agreement raising funding for defense and non-defense discretionary (annually appropriated) programs, it remains important, for two main reasons. First, it presents not only the President's proposed funding levels for individual discretionary programs but also his broader fiscal agenda, including how he wants to change major entitlement programs -- from health care to student loans to basic assistance for struggling families -- as well as tax policy.
Unless the priorities in the new budget represent a sharp departure from last year's Trump budget (and prior congressional Republican budget plans), it will present an agenda that would increase poverty, inequality, and the ranks of the uninsured while underfunding core public services and investments in various areas important for long-term growth.
The following are five questions to ask in evaluating the forthcoming Trump budget:
* Will it, like the Trump 2018 budget, call for repealing the Affordable Care Act (ACA) and cutting Medicaid deeply, causing millions of people to lose health coverage?
* Will it, like the Trump 2018 budget, call for deep cuts in nutrition, housing, and other basic assistance for struggling families, though the ink is barely dry on the new tax bill conferring large tax breaks on the wealthiest Americans? Two-thirds of the nearly
* Will the budget pair a high-profile new infrastructure initiative with cuts in other important infrastructure investments? The President is touting his infrastructure plan, but big questions about the plan remain unanswered. Last year's Trump budget paired a modest new investment in infrastructure in the short term with reductions in highway funding, mass transit, and other transportation programs -- resulting in cuts over the long term and likely shifting resources away from some of the most-needed infrastructure projects.
* Will it, like the Trump 2018 budget, call for deep cuts in non-defense discretionary funding over the next decade? The Trump 2019 budget almost certainly will have lower overall funding for non-defense discretionary programs in 2019 than in the new congressional agreement. That said, it will be important to consider the President's proposed funding levels after 2019 and to evaluate whether they reflect serious proposals or are merely a gimmick to mask deficit levels under the budget.
* Will the budget use rosy, unrealistic economic assumptions and other gimmicks to mask the budgetary impact of the new tax law and gloss over the nation's fiscal challenges? The Trump 2018 budget included only vague principles about tax reform, even as it claimed that its unspecified tax plan would both have no budgetary cost and help generate powerful "economic feedback" that, in turn, would add substantial revenue and reduce deficits by
Health Care
Last year's Trump budget would have cut
Those bills would have caused more than 20 million people to lose health coverage, shrunk subsidies for low- and moderate-income marketplace consumers, weakened protections for people with pre-existing conditions, and ended the ACA's Medicaid expansion for low-income adults. The bills also would have imposed a per capita cap on Medicaid funding for families with children, seniors, and people with disabilities.
Despite these legislative and administrative actions, almost 12 million people signed up for coverage in the ACA marketplaces during this year's open enrollment season. Another 12 million people are covered due to the Medicaid expansion, and another 64 million are covered under the pre-ACA Medicaid program. Millions more, including many people with job-based health plans, have better coverage because of the ACA -- for example, plans without annual or lifetime limits.
One key question is whether this year's Trump budget will set aside efforts to repeal the ACA and radically restructure and cut Medicaid.
Programs for Families and Individuals with Limited Means
The Trump 2018 budget called for unprecedented cuts in programs that help low- and moderate-income families afford the basics -- food, rent, and health care -- and improve their prospects for upward mobility. Fully two-thirds of that budget's nearly
In addition to the cuts in health care noted above, the Trump 2018 budget proposed to cut food assistance provided by the
Such cuts could be especially difficult to justify this year in the wake of a tax bill that bestows generous tax-cut benefits on those at the top of the economic ladder.
Last year, Administration officials defended many of their proposed cuts by suggesting that their policies would cause more people to find work -- even though the vast majority of adult participants in these programs already work or are unable to work due to health issues or other factors, and even though the cuts would have hit low-income children, seniors, and people with disabilities. Last year's budget would have cut or ended basic assistance for millions of struggling families and made it harder for such families to get back on their feet.
This year the
For example, rigid work requirements can harm working families whose work hours fluctuate and who thus sometimes fall below the required work-hours threshold because their employers didn't schedule them for enough hours in a given month. And families often lose assistance due to difficulties in satisfying extensive paperwork requirements to document that they're already working or qualify for an exemption because they are in ill health, are caring for a family member with a disability, or are struggling with a substance use disorder or domestic violence crisis.
To be sure, the President seemed to suggest in the State of the Union address that his budget may increase funding for job training and career and technical education -- areas that his 2018 budget cut significantly. But if his new budget also calls for deep cuts in 2020 and beyond in non-defense discretionary funding and
Infrastructure
Repeating a version of a promise he has made since the 2016 campaign,
The Administration says the core of its proposal will be approximately
The Trump 2018 budget also effectively imposed a major, permanent cut in the
By providing only a modest share of the funding needed for its proposed infrastructure investments, the President's proposal also appears -- based on leaked details -- to rely on states, cities, and the private sector to cover the vast majority of the costs. But the Administration hasn't explained where that money would come from. Most likely, the Administration's approach would favor projects that can yield profits for private investors, meaning that many needed projects -- in mass transit, school repairs, and the like -- could get short shrift even as some private investors secured lucrative gains.
Non-Defense Discretionary Programs
Bipartisan congressional negotiators have reached an agreement to raise overall defense and non-defense discretionary funding for 2018 and 2019, above the tight caps imposed by the Budget Control Act of 2011 (BCA) and reduced further by the BCA's "sequestration" process. Bipartisan agreements reached in
While the bipartisan congressional budget agreement includes a higher level of non-defense discretionary funding for 2018 and 2019 than the President's budget will likely recommend, the Appropriations Committees will at least consider the President's spending priorities for individual programs. Last year's budget not only failed to recognize the need for more adequate non-defense funding, but proposed to slash non-defense funding a stunning
Further, last year's Trump budget called for deeper cuts in total non-defense discretionary funding with each passing year, with the cut reaching 41 percent (in inflation-adjusted terms) by the tenth year.(6) (See Figure 2.) Cuts of this magnitude would require a drastic scaling back of government efforts in multiple areas, such as science, education, public health, environmental protection, the national parks, the courts,
It remains to be seen whether the Trump 2019 budget will again propose to dramatically shrink funding for non-defense appropriations over the decade. Given the large unmet needs funded by this area of the budget,(7) such deep cuts may strike observers as highly implausible. But if they aren't serious, then they're a gimmick to artificially hold down the budget's projected deficits.
The Budget's Economic Assumptions
The Trump 2019 budget's assumptions regarding matters such as economic growth and revenues over the coming decade will have a major impact on its forecast for deficits under the President's policies. Last year's Trump budget projected that the budget would reach balance in 2027 and that deficits in 2018-2027 would total
For example, the Trump 2018 budget assumed that economic growth would average 2.8 percent annually over the decade, after adjusting for inflation, while CBO projected 1.7 percent. That's an unprecedent gap between a President's growth forecast and CBO's.(8) The Administration argued that its tax, regulatory, and trade policies would generate much faster growth and higher revenues than CBO's projections, but provided few details about the policies that supposedly would ignite this robust growth. Most analysts found these growth and revenue projections implausible.
Last year's Trump budget preceded the drafting of the major tax law enacted in December. The budget provided principles for a tax reform plan but no details and assumed that the tax plan would be revenue neutral. But the tax plan enacted in December carries a projected cost of nearly
Moreover, to keep the plan's official cost down, many of its individual tax cuts (though not its corporate tax cuts) are slated to expire after 2025. Yet the Administration has made clear that it supports making the tax cuts permanent -- which would push the tax cuts' cost closer to
Now that the tax law's provisions are known and CBO and JCT have estimated their economic and budgetary effects, it will be instructive to see what revenue levels and economic growth rates the President assumes in his 2019 budget. If, as expected, the budget proposes no new revenue, it may once again rely on implausible assumptions of large "economic feedback" effects from its policies in order to show lower deficits.
CBO hasn't released baseline economic and budget projections since last June and isn't expected to release its analysis of the President's new budget until March, so there won't be recent CBO projections to provide a context for the economic and budgetary estimates that appear in the 2019 Trump budget. But while CBO may revise its economic growth projections upward for the next few years to reflect short-run stimulus from the tax cuts, any new claims in the forthcoming Trump budget of huge economic feedback from the new tax law -- claims the budget may use to mask the tax law's impact on the deficit -- would not likely withstand scrutiny.
Footnotes:
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