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Budget Proposal
Released on May 23, 2017

Policy Summary

Last Tuesday, President Trump’s White House released the Trump’s Budget proposal for the 2018 fiscal year. The document, titled “A New Foundation for American Greatness,” does not detail the sweeping tax cuts that are being pursued as part of the American Health Care Act (AHCA), but does assume that they have been put into place (read more about the AHCA).

The budget includes sweeping cuts to federal agencies and government programs. Budgets for the Environmental Protection Agency and the State Department will be cut by 31% and 29%, respectively, with additional 2% cuts every year. Funding for Medicaid and the Children’s Health Insurance Program (CHIP) will be cut by $616 billion, and welfare programs will be cut by $272 billion, with the largest cuts to food stamps (SNAP) at $190 billion and $15.6 billion for TANF. Finally, the budget also cuts $143 billion from Student Loans.

The budget also includes significant increases in military and defense spending. The Pentagon’s funding would increase spending by more than 10 percent, and the Department of Homeland Security would receive $1.6 billion for the border wall.

Analysis

The President’s budget is a symbolic document; Congressional approval is required for any budget. Even so, the contents of the budget are an important bellwether for future budget appropriations and agency funding. Moreover, much of the budget affects federal agencies, which are headed by Trump-appointed heads; agencies like the Environmental Protection Agency under Scott Pruitt and the Department of Education under Betsy Devos may reduce services in a way that will, in turn, lead to decreased appropriations by Congress. US Resist News has previously covered some of the potential consequences to cuts for the EPA

Elimination of Social Services

The presidential budget features more than $1 trillion in cuts for services that go primarily to low- or middle-income Americans. Some of these cuts, such as cuts to Social Security Disability, are presented as part of incentivizing Americans to “return to the labor force.” However, cuts to Medicaid, CHIP, SNAP, and TANF mean that low- and middle-income Americans would be less likely to be insured and would be spending more of their income on these basic necessities. In addition to likely endangering the lives of many citizens—including the more than 8 million children that CHIP insures—the cuts will likely stunt economic growth. The economy cannot grow if more Americans struggle to pay their bills.

Eliminating Avenues for Diplomacy

Trump’s proposed budget also includes cuts to the State Department and foreign aid. These cuts will severely diminish American diplomatic efforts. The State Department has already been weakened by the chaos of the new administration’s transition. Losing foreign aid—which represents a relatively small portion of the budget—would also remove an important diplomatic and negotiating tool for the country, affecting global stability.

Unlikely Assumptions about Revenues, Growth, and Cost-Cutting

Trump’s budget has been promoted as being revenue-neutral, but critics have begun pointing out that the “deficit-neutral” tax plan and “revenue-neutral” budget plan rely on overly optimistic assumptions about future growth as well as shoddy math to make sure the numbers turn out well. Trump’s budget assumes a 3% GDP growth; a full percentage point above the Congressional Budget Office’s forecast, and a number that US GDP growth has not attained since 1996. More than that, the budget assumes that the economy will provide enough growth to make the tax reform (which, again, is not detailed in the budget plan) deficit-neutral, and that estimated growth is again assumed to bring enough revenue to offset the increased spending of the budget.

Additionally, the Trump budget assumes that tax revenues will increase in spite of the sweeping tax cuts proposed in the American Health Care Act. However, a similar tax proposal that was actually passed in Kansas has led to ballooning deficits in Kansas. Some experts believe that the tax cuts actually encourage tax avoidance in the state.

It is highly unlikely that Congress will adopt a budget that looks much like the one put out by the White House, especially given the deep cuts to Medicaid. However, a Republican-dominated Senate is likely eager to pass at least some of the proposed tax cuts presented in the American Health Care Act (if not the more ambitious reform elements), and it is almost certain that major federal agencies will receive cuts in funding as well.

This brief was compiled by Ivy Perez. If you have comments or want to add the name of your organization to this brief, please contact ivy@usresistnews.org.


 

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