Inside Trump's $4.4 Trillion Budget: More Defense and Red Ink
(Bloomberg) -- President Donald Trump proposed a $4.4 trillion federal budget on Monday for fiscal 2019, a plan Congress is expected to all but ignore that would slash entitlements and other domestic programs in favor of higher spending on the military and immigration enforcement.
Trump again asked lawmakers for drastic reductions in environmental, research and diplomatic programs he’s long derided as wasteful: a 27 percent cut to the State Department; 25 percent to the Environmental Protection Agency; cost-cutting overhauls to Medicare and other social safety-net programs. That money would be partially diverted toward building a wall on the Mexican border and boosting defense spending.
The Pentagon would see an $80 billion increase in its budget, up 13 percent. Entitlement programs would see a $1.7 trillion cut over a decade, including $237 billion from Medicare.
The budget shows the 2019 deficit nearly doubling from projections last year, to $984 billion. The red ink would total $7.1 trillion over the next decade, the national debt would rise to nearly $30 trillion, and the budget would not balance. That assumes Congress adopts all Trump’s proposals, including spending cuts, and the economy doesn’t suffer a downturn for at least a decade.
Any president’s budget proposal is customarily dismissed by Congress -- which controls the government’s purse strings, under the Constitution -- as a dead-on-arrival wish list. That’s especially true with this year’s document. Just last week, Congress passed its own bipartisan two-year budget agreement that increased caps for both domestic and defense spending.
Mick Mulvaney, the director of the Office of Management and Budget, said that Trump’s proposal “is a messaging document. The executive budget has always been a messaging document.”
One message, he said, is that “you don’t have to spend all of this money, Congress, but if you do here is how we would prefer you spend it.” The other, he said: “We do not have to have trillion-dollar deficits forever.”
The White House scrambled over the weekend to re-write its proposal to account for the deal, only increasing the likelihood that legislators dismiss Trump’s plan. The agreement boosts spending caps by $300 billion and provides $90 billion in emergency disaster aid.
Here’s a look at some of the highlights in the president’s plan:
Red Ink Flows Indefinitely
The congressional agreement on spending caps sets the stage for major increases in both defense and domestic accounts. In a letter accompanying the budget, Mulvaney urged Congress to restrain domestic spending despite the agreement, citing the deficit.
The tax law that Trump signed in December is by itself projected to add more than $1 trillion to the deficit over the next decade. Domestic spending under the new caps Congress agreed to last week would add $680 billion in deficits over 10 years on top of red ink already in the budget, Mulvaney wrote. He proposed spending $57 billion less than the new cap.
Congress is all but certain to ignore that advice. Lawmakers are already working on a spending bill to meet the new caps and plan to present it to Trump by March 23, the next deadline to fund the government for fiscal 2018.
Fiscal conservatives will be dismayed that Trump’s proposal fails to balance the budget over the next 10 years, hitherto Republican orthodoxy. Proposals to gut domestic programs are meanwhile anathema to Democrats.
Infrastructure Plan Relies on Private, Local Funding
The president’s infrastructure plan would reallocate $200 billion in federal funds over the next decade as seed money to spur states, local governments, and the private sector to finance public works projects. The administration estimates it would create as much as $1.5 trillion in investments. Ahead of the budget release on Monday, Trump met with state and local officials at the White House to tout the plan.
“We have some very exciting things to be talking about, things you’ve been waiting for for a long time, for many, many years, and now let’s see how badly you want it,” Trump said at the event. “We’re really way behind schedule, we’re way behind other countries. We always led the way for many, many years. Then a number of decades ago it slowed down, and over the last eight years and 15 years, to be honest, it’s come to a halt.”
A Wall and Thousands More Immigration Officers
The budget would dramatically increase U.S. immigration enforcement, a hallmark issue for the president. He wants $782 million to hire 2,750 new border and immigration officers and $2.7 billion to detain people who are in the country illegally. Trump also wants $18 billion over the next two fiscal years to build a wall on the U.S. border with Mexico -- a key point of contention in the ongoing legislative battle over people known as “dreamers” who were brought to the country illegally as children.
Trump also envisions increasing spending on deportation proceedings, with the U.S. currently facing a backlog of some 650,000 cases. The proposal calls for $40 million to support 75 new immigration judges, and another $40 million for 338 new prosecutors at Immigration and Customs Enforcement. Trump would spend $253 million to complete a biometric entry-exit system that the administration says would better help identify terrorists and criminals.
Defense Boost Funds More Ships and Jets
The White House envisions a massive $80 billion boost to defense spending, by far the largest increase for any federal department. The proposal includes the purchase of new ships for the U.S. Navy and calls for adding 24 Boeing Co. F/A-18E/F Super Hornet jets in fiscal 2019 and 110 new jets over the next decade. It would fund 20 new missile defense interceptors and silos, a new “homeland defense radar” in Hawaii and, for the first time, a “salvo” test to fire two interceptors at once at an incoming target.
Trump’s overall national security budget -- which includes Energy Department nuclear weapons programs and defense-related activities at the FBI and smaller agencies -- would total $716 billion.
Fewer Diplomats, Less Foreign Aid
The budget once again guts U.S. diplomatic and foreign aid spending, cutting more than 29 percent -- about $17 billion -- from 2017 levels for the State Department and other international programs.
The administration says that by cutting foreign assistance, the U.S. would promote “self-reliance” among developing countries, ultimately ending their need for aid. The administration also said it would review contributions to multilateral organizations like the United Nations to evaluate if the spending “advances American interests.”
Some programs do survive the proposed cuts. The administration requests $4.6 billion for the protection of American diplomats and staff overseas and $8.2 billion to upgrade the State Department’s information technology. The budget also includes continued aid to Israel under the terms of a 10-year agreement reached last year.
And the construction of a new U.S. Embassy in Jerusalem “will be among the department’s highest priority for capital security investments in FY 2018 and FY 2019,” according to the budget.
Opioid Epidemic Gains More Funding
Trump requested $13 billion in new funding to combat the opioid epidemic, which he has frequently cited as among his top domestic priorities. The president’s proposal includes $50 million for an anti-opioid media campaign, $50 million for overdose-reversal drugs to be distributed to emergency workers, and $100 million for prevention activities, including a state-based program to monitor painkiller prescriptions. Trump also envisions a $100 million public-private partnership between the National institutes of Health and the pharmaceutical industry to develop treatments for addiction, overdose reversal, and non-addictive painkillers.
The proposal also includes $85.5 billion in discretionary funding for the Department of Veterans Affairs -- nearly a 15 percent increase, one of the largest in the budget. That includes a 9.6 percent increase for veterans’ health services and $11.9 billion to expand health care options for former service members outside the VA system.
Health Care ‘Transition Away from Obamacare’
The budget proposes to “transition away from Obamacare” by changing the way Medicaid, the health program for the poor, is financed. The Affordable Care Act gave states the option to expand the program, in which spending is now relatively open-ended, to cover more people earning poverty-level wages. Trump would change Medicaid financing dramatically, giving states a choice between a per-person cap on federal payments under the program or a block grant. Either option would provide a fixed amount of money each year but with fewer federal rules on its use.
Trump also proposes to cut federal payments to home-health agencies and nursing homes by $80 billion over a decade and to reduce payments to hospitals by nearly $200 billion, including reductions for hospital-owned doctor’s offices.
Amtrak Funding Cut in Half
Funding for U.S. passenger rail would be cut in half under the budget proposal. The Trump budget proposes $738 million to fund Amtrak, which requires subsidies for routes that lose money -- a 51 percent cut.
The budget proposes that states step in to help fund money-losing Amtrak service. While revenues are up on the Northeast Corridor between Boston and Washington, most passenger rail service elsewhere in the country loses money.
IRS Cuts as Tax Law is Enacted
The budget proposes trimming spending for the Internal Revenue Service overall by 6.1 percent, to $11.1 billion, as it works on enacting the tax overhaul Trump signed in December. The agency would get more money to protect against tax cheats and computer hacking, and the budget proposes allowing it to more easily change errors in tax returns to prevent erroneous refunds.
The comparisons in this article are based on the enacted spending levels for fiscal 2017, the last year that figures for full funding of the government are available. The government has been operating on stopgap funding since Oct. 1, the beginning of fiscal 2018. While the White House provided an addendum to account for the spending deal Trump signed on Friday, numbers for some agencies and programs may be subject to change.
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