Blog , Finance

Trump’s Budget Would Chip Away at the Debt, but More Work Still Needed

Posted on Tuesday, March 12, 2019
by Outside Contributor

Budget season is officially upon us.

On Monday, President Donald Trump released a preliminary sketch of his fiscal year 2020 budget proposal. The outline reflects a good first step toward restoring fiscal sustainability. It would cut spending by trillions of dollars and rejects the notion that another massive budget cap-lifting deal is essential to provide for national defense.

Yet much more is needed if the U.S. is going to stave off a future budget meltdown. Trump’s proposal would fail to reach balance in 10 years and would do little to address unsustainable entitlement programs, which are driving much of the budget’s projected long-term spending growth.

The bottom line is that absent economically destructive tax increases, without fundamentally reforming Social Security, Medicare, and Medicaid, it will be impossible to achieve a sustainable budget over the long term.

The document released Monday is just a preview of what’s in the president’s full budget proposal, which will be released March 18. Here’s what we know so far.

Like the fiscal year 2019 budget, this budget proposal would not balance within the 10-year budget window. Yet the administration projects that it would reach surplus by 2034. In total, it would cut spending by $2.7 trillion over the next decade.

Of the $2.7 trillion in spending cuts, $2.1 trillion of the savings would come from cuts to mandatory programs. But concerningly, only 24 percent of these cuts would be implemented during the first five years of the budget window.

Taxpayers would be better served if reforms took place immediately, not years down the road.

Under the president’s budget, deficit and debt levels would start to decline. After reaching a deficit of $1.1 trillion in 2021, the deficit would decline to $202 billion by 2029. The administration projects that debt held by the public will rise by $7.5 trillion over the next decade, but will decrease as a share of the economy from 79.5 percent to 71.3 percent.

Perhaps the most interesting part of the president’s fiscal year 2020 budget is how it could shape the debate over the future of the Budget Control Act spending caps. The caps are set to run through 2021, yet some lawmakers are already pushing for another two-year deal to increase the limits.

The president’s treatment of the budget caps this year stands in contrast to his previous two budgets. Both the 2018 and 2019 budget proposals would have eliminated the firewall between defense and nondefense spending, creating one overall cap on discretionary spending. This allowed the administration to prioritize defense spending without breaking the total spending limit.

In both the president’s previous budgets, every dollar increase in defense spending was equally paid for by a cut to nondefense programs.

The fiscal year 2020 budget takes a different approach. The president’s proposal would maintain both the defense and nondefense caps put in place by the Budget Control Act. That means that in 2020, base defense funding would be $71 billion below fiscal year 2019 levels.

To compensate for this, the budget calls for a cap-exempt overseas contingency operations adjustment of $174 billion—a backdoor way of raising defense spending. Trump’s proposal would follow the same approach in 2021, proposing $156 billion in overseas contingency operations funds that year.

Under the Budget Control Act, nondefense spending is currently set to fall from $597 billion to $543 billion in 2020. The president’s budget calls for a nondefense cut of 4.6 percent, which would save $27 billion compared to current law. Yet the administration assumes the enactment of a rescissions package and budgetary gimmick savings through Changes in Mandatory Programs to further reduce nondefense spending to the Budget Control Act level.

The president should be commended for wanting to properly fund the military while staying within the budget caps, but the way this budget does it is not ideal.

The president should follow his previous two proposals and propose eliminating the firewall between defense and nondefense spending. This would force Congress to focus on its constitutional obligations, like ensuring a strong national defense, without breaking the budget caps.

It is possible to fully fund the military while reducing spending and cutting taxes. The Heritage Foundation’s “Blueprint for Balance” illustrates a path to do just that. There is no reason to use overseas contingency operations funding as a gimmick to evade the spending caps any more than there is a need for another deficit-increasing budget deal.

Budget observers are anxiously awaiting next week’s full release of the president’s budget. As is so often the case, the devil is in the details, and more information will be needed to fully understand the implications of this proposal.

But one thing is already clear: While the president’s budget would make progress on controlling spending and reducing the national debt, there is much work yet to be done.

It’s now up to the president and Congress to work together and find a responsible path forward that cuts spending, reduces the national debt, and ensures economic prosperity and opportunity for all Americans.

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5 years ago

No worries AMAC. The budget the President proposes to Congress is simply that…a proposal. If both houses of Congress were still held by Republican majorities, then the budget would at least be up for discussion. Which means it would still be difficult, although not impossible, for the President to get most of what he proposes. Don’t forget, even when both houses of Congress were held by Republicans, the RINO contingent in both houses was NOT in favor of most of President Trump’s spending priorities. Now with the House of Representatives under control of the Democrats, that means the President’s budget is effectively DOA. Democrats simply don’t believe in defense spending nor the need to fund anything related to the border or general national security concerns. Their emphasis is on reducing the capability of both the DoD and our nation’s border and immigration enforcement agencies. The Democrats instead view increased social welfare spending as key to increasing the dependency class and the power of the Democrat Party to push the country towards the socialist future they perceive as Utopia.

Remember, elections have very real consequences and our side took a big step backwards when too many on our side decided the 2018 mid-terms were not that important. That most people on our side did nothing between the election of President Trump in 2016 and the mid-terms in 2018 to try and really reach out to voters on the other side (not simply screaming socialist or communist in their faces, but trying to have real, rational discussions) to see the benefits of the Trump agenda versus the dead-end offered up by the Democrats’ identity politics policies. That a bunch of people on our side could just sit home and “somebody else” would ensure the Republicans held control of both houses of Congress needed to keep the Trump agenda on some kind of viable track. Now of course, all we will hear over the next few days is how the Democrats in the House will be putting forward their own budget and that it bears NO RESEMBLANCE to that of President Trump. Thus setting the stage for another series of budget battles where the RINO’s in the Senate urge the President to capitulate to the Democrat spending priorities to avoid the potential for another government shutdown at ANY cost. All this could have been avoided if only some on our side made better choices leading up to the 2018 mid-terms. Now we are stuck for the next two years with the consequences of those bad choices. Think America before you don’t have a country left that you can recognize. Just a thought.

Dan W.
Dan W.
5 years ago

There is a 0% chance that either party has the fortitude to tackle meaningful reform of either Social Security or Medicare. Both parties are scared spitless of older voters.

Bottom line, there is no deficit relief coming until Social Security and/or Medicare are on the verge of crashing our whole fiscal system which just might scare the politicians worse than older voters do now.

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