Feb 10, 2020 - Politics & Policy

Trump's budget proposal relies on highly unlikely expectations

Reproduced from WSJ.com; Chart: Axios Visuals

President Trump is expected to double down on big spending and tax cuts when he releases his budget proposal for fiscal year 2021 later today.

The big picture: The budget proposes increases in defense spending and other categories and also assumes the annual budget deficit will fall from more than $1 trillion in 2020 to around $200 billion, largely as a result of increased U.S. growth.

  • The budget projects 3% growth every year for the next 15 years, even though annual GDP has not grown by that amount during Trump's presidency and last hit that growth rate 15 years ago.
  • The growth projection is about double the CBO's expectation for growth during that time period.

Between the lines: Trump's budget also proposes to cut spending by $4.4 trillion over the next 10 years. Of that, it targets $2 trillion from mandatory spending programs, which would require action from Congress.

  • Trump proposes to cut EPA spending by 26%, the Department of Housing and Urban Development’s budget by 15%, the Commerce Department by 37%, foreign aid by 21%, and the CDC by 9%.

Reality check: Presidential budget proposals rarely, if ever, reflect actual spending. However, the proposal does provide insight into the Trump administration's policy priorities.

What they're saying: Vice President Mike Pence suggested in a Friday interview with CNBC that the debt and deficits are not a primary focus of the administration.

  • "The president came in and said first and foremost we have to restore growth," he said. "That's how we'll deal with the long-term fiscal challenges facing our country."

Go deeper:

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Despite massive cuts, deficits flow through Trump's second term

Trump addresses the crowd during the Opportunity Now summit at Central Piedmont Community College on Feb. 7 in Charlotte, N.C. Photo: Sean Rayford/Getty Images

President Trump's 2021 budget proposes $4.6 trillion in deficit reduction, but it would take 15 years to balance, according to a source familiar with the budget.

The big picture: The budget will project deficits until 2035 and rather than proposing a new round of tax cuts, it assumes the extension of Trump's 2017 tax bill through the next term.

First trillion-dollar deficit not caused by the Great Recession

Data: Congressional Budget Office; Chart: Axios Visuals

The Congressional Budget Office expects the U.S. budget deficit will top $1 trillion in fiscal year 2020, the first trillion-dollar deficit in history not caused by the Great Recession.

Why it matters: The deficit is rising at a time of exceptionally low unemployment and solid economic growth, rather than during a crisis, which is typically when spending elevates.

Go deeperArrowJan 29, 2020

U.S. deficit projected to exceed $1 trillion in 2020

Illustration: Aïda Amer/Axios

The U.S. government's budget deficit is projected to top $1 trillion in 2020, according to the latest Congressional Budget Office report released Tuesday.

The big picture: If the projections pan out, this would be the first time since 2012 the deficit hit $1 trillion. In 2020, deficits are expected to increase from 4.6% of GDP to 5.4% in 2030 — growing to the highest sustained levels since World War II, according to the report.

Go deeperArrowJan 28, 2020