U.S. President Donald Trump pauses while holding an umbrella to shelter from the rain during the American Commemoration Ceremony at the Suresnes American Cemetery in Paris, France. (Photographer: Marlene Awaad/Bloomberg)

Trump's $4.7 Trillion Budget Headed for Rejection by Congress

(Bloomberg) -- President Donald Trump is seeking one of the largest-ever cuts to domestic discretionary spending in a $4.7 trillion fiscal 2020 budget proposal that also boosts defense spending and adds $8.6 billion for building a border wall.

The budget blueprint released Monday, which forecasts annual deficits extending beyond the next decade and rising national debt, represents a wish list for the president’s priorities that is certain to be ignored by Congress. It also raises the threat of a funding showdown that could trigger another government shutdown in the fall.

The proposal calls for reducing regular non-defense discretionary spending from $597 billion to $543 billion, a $54 billion, or 9 percent cut in 2020. When disaster-relief funding is factored in, the cut amounts to $28 billion, or 4.6 percent.

Particularly hard hit would be the Environmental Protection Agency, and departments of State, Energy, Transportation and Agriculture. The EPA would receive a 31 percent cut compared with its December funding level, while State would receive a 23 percent cut and Housing and Urban Development would see a 16 percent cut. Along with Defense, the departments of Homeland Security and Veterans Affairs would get increases larger than expected inflation.

The top Democrat on the House Appropriations Committee immediately dismissed the administration’s proposal. “President Trump has somehow managed to produce a budget request even more untethered from reality than his past two,” Nita Lowey of New York said in a statement. “The Trump budget has no chance of garnering the necessary bipartisan support to become law.”

Partial View

The document lacks details on individual programs that normally comes as part of the president’s request. The rest is expected later this month.

Still, the plan provides an early view into the policy platform Trump is likely to adopt in his re-election fight, emphasizing security and immigration control priorities at the expense of welfare programs viewed skeptically by many within his base.

It also will provide campaign fodder for the legion of Democrats seeking to oust him from the White House in 2020 as well as congressional candidates, who are likely to seize on proposals to cut social services and add new eligibility requirements as they seek to persuade suburban voters.

Mandatory Programs

To achieve savings in some mandatory programs, Medicaid would be transformed partially into a grant program, crop insurance supports would be cut and $200 billion would be saved by changing student loans. The budget says rooting out Medicare waste nets $456 billion over 10 years.

The president’s top priorities, meanwhile receive a $1 trillion boost over 10 years under his proposal, including a $34 billion boost in overall defense spending to $750 billion in 2020.

Under current law, the $716 billion defense budget cap would fall to $576 billion in fiscal 2020 and the non-defense cap would fall from $597 billion to $543 billion. Trump is proposing to keep both caps in place while supplying defense with $165 billion in war funds not subject to automatic cuts and another $9 billion in emergency funds. Pentagon officials and lawmakers have long derided using emergency war funds for regular Defense Department operations as a gimmick.

Funding proposed for the construction of his coveted border wall next year would come from $5 billion in the Homeland Security budget and $3.6 billion from military construction funds. He’s requesting an additional $3.6 billion for military construction to replace money he intends to shift this year to border wall construction.

The administration is proposing to offset some agency costs by imposing new fees on oil companies, chemical manufacturers and railroads. For instance, new chemical facility compliance assurance fee would help offset costs at the Environmental Protection Agency, raising some $20 million in fiscal 2020. An oil facility compliance assistance fee would raise an estimated $100 million over the next decade.

The administration also is proposing a new fee for replacing Social Security cards, estimated to bring in $270 million in fiscal 2020.

Trump proposes to charge e-cigarette makers user fees similar to those cigarette companies must pay to support the FDA’s oversight of the products. The annual tobacco user-fee cap of $712 million would be increased by $100 million under the proposal.

Budget Caps

Trump’s third budget proposal represents an aggressive opening bid in negotiations with lawmakers, who will be grappling with how to manage automatic budget cuts that under law are scheduled to kick in later this year. Negotiations over funding caps must be resolved before Congress can pass the 12 annual spending bills needed to keep the government open after Oct. 1.

Even with the cuts and an assumption that the economy would grow at an average 3 percent for a decade -- higher than estimates of private economists -- the budget doesn’t balance in 10 years and shows a $202 billion deficit in 2029. The deficit is projected to exceed $1 trillion through 2022. The budget calls for no net tax increases, although some user fees would increase.

Shutdown Threat

So far, Democrats say Trump’s heavily partisan proposal risks further damaging an already broken budget process. Disagreements between Trump and Democrats over border-security spending led to a 35-day partial government shutdown that ended earlier this year.

“If they stick to their guns they’ll end up shutting the government down,” said House Budget Committee Chairman John Yarmuth, a Kentucky Democrat.

Even with the spending reductions and rosy economic projections from the White House, the budget plan doesn’t claim to lead to a balance for some 15 years and it forecasts the nation will cross the mark of $31 trillion in total national debt over the next decade.

Bill Hoagland, a former Republican Senate budget staff director, said the budget isn’t a serious attempt to craft a bipartisan deal that would cut the deficit. During his campaign for president, Trump said he would balance the budget quickly and reduce federal debt.

“The Trump administration has seemingly been overwhelmed by how difficult it is to balance the federal budget while also lowering taxes, preserving mandatory (entitlement) spending, and increasing military spending,” he said.

The budget request mirrors the one the White House produced last year. Trump in his fiscal 2019 plan called for $3.6 trillion in cuts and this year he is proposing $3.9 trillion in cuts tempered by $1.1 trillion in increases for priorities like defense and infrastructure. As in the past, Trump is proposing $200 billion for infrastructure improvements.

The next steps in the process toward a budget cap deal will be for the House and Senate budget committees to produce their own budget visions. Senate Budget Chairman Mike Enzi, a Wyoming Republican, plans to produce a five-year budget vision during the last week of March, while Yarmuth plans to produce a Democratic budget by mid-April. Those budget resolutions could form the basis of a caps deal.

The debate over spending and budget caps also will entangle negotiations on raising the federal debt limit, which snapped back into place March 2. The Treasury Department has been able to shift funds and take other so-called extraordinary measures to prevent a default on the government’s debt.

Many Democrats hope to tie the debt ceiling to a caps accord as a way to speed the process of getting a deal. The true deadline for extraordinary measures to run out is likely by September, while the automatic cuts known as sequestration do not kick in until December or January.

The Trump budget does not explicitly call for a debt ceiling increase but by adding $10 trillion in debt over 10 years, it would likely require many.

©2019 Bloomberg L.P.