Trump's Budget Bites Deeply Into Programs Benefiting His Voters

(Bloomberg) -- President Donald Trump made an impassioned plea for support from minority voters during his election campaign by asking them, “What do you have to lose?”

On Tuesday, they got an answer, as did many of the rural, poor and working-class voters who propelled him into office. In his fiscal 2018 budget proposal, Trump asked Congress for $3.6 trillion in spending cuts that would mean steep reductions in food stamps, Medicaid health insurance payments, disability benefits, low-income housing assistance and block grants that fund meals-on-wheels for the elderly.

The plan found little favor in Congress, even among Republican lawmakers from districts and states that gave Trump wide margins in the November election, and it had Democrats talking about a deal on spending that would exclude the White House.

The administration was undeterred. Budget Director Mick Mulvaney called the spending proposal released Tuesday a rethinking of government to place greater weight on the interests of the people who pay taxes rather than those who turn to it for help.

“It’s a taxpayer-first budget,” Mulvaney said. “We are no longer going to measure compassion by the number of programs and the amount spent on those programs.”

Congressional Priorities

But Congress has its own plans and, as Senate Republican leader Mitch McConnell said in an interview last week with Bloomberg News, Trump’s priorities “aren’t necessarily ours.”

“We know the president’s budget is not going to be passed as proposed,” Republican Senator John Cornyn said on Tuesday. Even so, Senate Republicans are working to implement some of Trump’s proposed Medicaid cuts as part of an Obamacare repeal bill and plan to take up his proposed tax rate cuts later this year.

Senate Democratic leader Chuck Schumer called Trump’s budget “the latest example of the president breaking his promises to working Americans.” But he also highlighted the bipartisan agreement on 2017 spending that cut the White House out of negotiations. He held out hope for a repeat of that deal, saying “our Republican colleagues dislike this budget almost as much as we do.”

House Speaker Paul Ryan said Trump’s budget, like those of his predecessors, will get a heavy reworking in Congress. But he sought to highlight areas where the White House and congressional Republicans share similar goals.

“Here’s what I’m happy about: We finally have a president who’s willing to actually even balance the budget,” Ryan told reporters. “And we will have a great debate about the details on how to achieve those goals.”

Deep Cuts

Trump’s fiscal plan reaches deeply into programs relied on by many of his core supporters, including cuts of $610 billion from Medicaid alongside alongside $250 billion savings from repealing Obamacare, $193 billion from food stamps and $72 billion in Social Security’s Supplemental Security Income program, which provide cash benefits for the poor and disabled.

States that Trump carried in the presidential election are high on the list of those that spent the most federal money for Medicaid in 2016, including Pennsylvania at No. 4 with $16.6 billion, Ohio a notch lower with $15.1 billion and Michigan at No. 7 with $12.3 billion, according to the Kaiser Family Foundation.

Among the top 25 states for proportion of households receiving food stamps, Trump won 16 of them, according to a comparison of election results and Census Bureau figures. That includes three in the top five for usage: Mississippi, West Virginia and Kentucky.

Those three also are among the top states with the highest proportion of beneficiaries of Social Security disability payments. Of the 25 states with the highest shares of recipients compared with total population, Trump carried 17 of them in November.

Agricultural Programs

Cuts to agricultural programs also will be felt in Trump country. Eight of the 10 states that received the most federal money in farm subsides voted for Trump, according to a state ranking compiled by the Environmental Working Group. Even in Illinois and Minnesota, the two states that voted for Democrat Hillary Clinton, rural areas supported the Republican.

Trump’s proposal claims to balance the budget within a decade. But it relies on a tax plan for which the administration has provided precious little detail and makes heavy use of accounting gimmicks.

The budget predicts a sweeping tax overhaul package that would strengthen economic growth while providing few details of how the tax code would change. The one thing the administration has said is people and businesses will pay less; the budget asserts the amount of revenue collected won’t drop.

Neither of the White House’s assertions -- that Trump’s tax plan would be both revenue neutral and fuel budget coffers by $2 trillion to $2.6 trillion through economic growth -- are realistic, said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget.

‘Impossible Assumptions’

She called the administration’s projections of three percent annual growth "really not possible -- they have impossible assumptions of no changes in revenue and tax cuts." She added that to see three or four percent growth "is nearly unprecedented. You’d need productivity growth at a level you’ve never seen."

The scant detail in Trump’s tax proposal was likely to hinder tax reform, she said. “They rolled out all the goodies but none of the offsets that would be necessary,” MacGuineas said. “I’m not a fan of surprises, and you have to set realistic expectations, because there are real trade-offs and choices.”

The independent Tax Policy Center estimated that Trump’s campaign tax plan would add $7.2 trillion to the deficit. Economic growth spurred by Trump’s tax and regulation policy would add more than $2 trillion in tax revenue, according to the budget documents.

The budget also makes use of several other classic accounting gimmicks. It assumes that the wars in Afghanistan and the Middle East will cause future Congresses to allocate $593 billion in extra war funding that won’t be needed and then claims to save that amount by not spending it.

The Trump budget also assumes a $35 billion savings from changes to financial services industry regulations and a repeal of the Dodd-Frank law’s orderly liquidation authority, under which financial regulators are empowered to untangle and wind down the biggest banks in a crisis. The nonpartisan Congressional Budget Office projected savings of $14.5 billion over a decade from eliminating the authority.

The plan calls for some new domestic spending, including $25 billion over 10 years for nationwide paid parental leave -- a cause championed by first daughter Ivanka Trump -- and an expansion of the Pell Grant program for low-income students. The Department of Homeland Security’s budget would increase $3 billion versus the final full year of President Barack Obama’s term.

While the Pentagon’s budget would see a $6 billion increase, the push for more high-priced weapons -- including fulfilling Trump’s pledge to increase the Navy fleet to 350 ships from 275 that can be deployed today -- will wait another year.

He’s also proposing cutting funding for the State Department by more than 28 percent, which Republican Senator Lindsey Graham said “will gut soft power.”

“If we implemented this budget you’d have to retreat from the world or put a lot of people at risk,” said Graham, a member of the Appropriations Committee. “A lot of Benghazis in the making if we actually implemented the State Department cuts.”

He said the Trump budget “is not going to go anywhere.”

The administration has pitched its changes to student loan programs as beneficial to students. The budget would create a single repayment plan that would cap monthly payments at 12.5 percent of discretionary income, an increase from the 10 percent cap under some existing payment plans. But students would only need to repay their loans for 15 years, rather than 20, with the remainder wiped out by the federal government. That change would cut the federal subsidy by $76 billion.

The proposal seeks to boost government revenues by allowing drilling in the Arctic National Wildlife Refuge, ending the practice of sharing oil royalties with states along the Gulf of Mexico and selling off government-owned electricity transmission lines in the West. Like much of the budget, those moves are likely to face opposition on Capitol Hill.

Trump has promised a wall on the southern U.S. border that Mexico will eventually pay for, and the budget includes $2.6 billion in 2018 – $1.6 billion for “new and replacement border wall’’ in certain locations and about $1 billion for other items including aircraft, equipment and surveillance technology to deter illegal activity. Trump estimates the wall will cost $8 billion to $12 billion, but most experts say it will likely be more expensive.

--With assistance from Megan Durisin Elizabeth Dexheimer Lynnley Browning Laura Curtis John Hughes James Rowley Justin Sink and Mark Niquette

To contact the reporters on this story: Erik Wasson in Washington at ewasson@bloomberg.net, Steven T. Dennis in Washington at sdennis17@bloomberg.net, John McCormick in Chicago at jmccormick16@bloomberg.net.

To contact the editors responsible for this story: Alex Wayne at awayne3@bloomberg.net, Joe Sobczyk, Mike Dorning