May 23, 2017

Deep spending cuts in Trump's "taxpayer first" budget

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Data: White House; Note: Doesn't include reprioritized discretionary spending; Chart: Andrew Witherspoon / Axios

Office of Management and Budget director Mick Mulvaney briefed White House reporters today on President Trump's 2018 budget proposal, to be released tomorrow morning. Here's what you need to know:

  • $3.6 trillion in total spending reductions over 10 years
  • Includes $1.7 trillion in savings from "mandatory" spending
  • Biggest savings: More than $800 billion from health care
  • Balances the budget in 10 years

Our thought bubble: Presidential budgets are aspirational political documents. None of these cuts (or increases) will happen without Congress. Democrats will go along with none of this and Republicans are already wary. Congress is going to write its own budget, but realistically, they're not going to start completely from scratch either. They have to take the administration's priorities into account.

Branding / philosophical underpinning:

  • The official title of the budget: "A new foundation for American jobs."
  • Mulvaney calls it the "taxpayer-first" budget. What he means by that: Mulvaney says the administration is thinking about the budget in a fundamentally different way than previous administrations did. Mulvaney says they're now thinking more about the people who are paying the taxes — and trying to justify asking hardworking people to cough up money — rather than focusing on the people who are receiving the benefits.
  • The Trump administration wants to redefine what "compassion" means. Mulvaney says it should no longer be measured based on how many programs are in effect or how many people are receiving the benefit. He wants "compassion" to be broadened to include whether the government is ripping off taxpayers by using their money for ineffective programs.

The budget balances in 10 years, but relies on some very sketchy assumptions:

  • It assumes passage of the American Health Care Act — the Affordable Care Act repeal and replacement bill that passed the House but will soon face strong moderating forces in the Senate.
  • It assumes Trump can sign into law tax reform that is revenue neutral. That's quite an assumption given that most people have already written the obituary for the main policy House Republicans plan to use to pay for big tax cuts — the "border adjustment tax."
  • It assumes that Trump can increase the economic growth rate to 3 percent from the currently projected 1.9 percent. To get there, they're assuming Trump can make historic tax cuts (corporate rate to 15%!!!) and slash regulations.

Safety net programs are cut significantly:

  • As Axios scooped on Sunday evening, Trump's budget proposal will cut spending on "mandatory" (mostly social welfare) programs by about $1.7 trillion over ten years.
  • Medicaid would be cut by $610 billion over 10 years — but when added to the rest of ACA repeal, total health care savings would be $866 billion.
  • Tightens eligibility for SNAP (food stamps), cutting $193 billion from the budget over 10 years.
  • Requires people to have Social Security numbers if they want to receive the Earned Income Tax Credit and the Child Tax Credit. Mulvaney said it's not fair to expect taxpayers to pay for illegal immigrant families to receive these benefits. Saves $40 billion over ten years.
  • Cuts $5.8 billion from the Children's Health Insurance Program.
  • Cuts $21 billion from the Temporary Assistance for Needy Families (TANF) program.

No Social Security (retirement payments) or Medicare cuts: Mulvaney, a fiscal hardliner, argued strongly to Trump that he should reform Social Security (retirement payments) and Medicare benefits, but Mulvaney says Trump refused to cut these programs because he promised not to on the campaign trail.

Yes, but: Trump's budget would cut programs that fall into the safety net category and one in particular, the Social Security Disability Insurance program (SSDI), that many will argue breaks his promise not to cut Social Security.

Massive cuts to non-defense discretionary spending:

  • Unsurprisingly, Trump is proposing slashing many government agency budgets that don't fit with his priorities. He's asking Congress to cut around $1.5 trillion out of non-defense discretionary spending over 10 years.
  • Agencies hardest hit: EPA (slashes 31.4% off budget in first year), State Department (-29.1%), Agriculture (-20.5%), Labor (-19.8%) and Health and Human Services (-16.2%)

Where Trump is boosting spending:

  • Military: Trump is proposing to increase the previously-projected defense budget by 4.6%, or $25.4 billion in 2018.
  • Border security: Plussing up the previously-projected Homeland Security budget by 6.8%, or $2.8 billion in 2018.
  • Vets: Boosting the previously-projected Veterans Affairs budget by 5.8% or $4.3 billion in 2018.
  • Paid parental leave: Includes $19 billion over 10 years to help states provide up to six weeks of paid leave for new mothers and fathers. Mulvaney says the proposal would encourage them to go back into the workforce, which would boost economic growth.

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