President Trump will seek to balance the federal budget partly by cutting congressional appropriations, other than defense, by 2 percent every year.
The "two-penny plan," as Office and Management Budget Director Mick Mulvaney described it to reporters Monday, would cut $1.4 trillion in nondefense spending out of $3.6 trillion in total cuts over 10 years, limiting that category of government spending to historically low levels.
Trump's fiscal 2018 budget proposal, set to be delivered to Congress Tuesday, is a wish list of policies and plans for spending and taxing. To reach balance by the 10th year, meaning that spending will equal tax revenue, it will include major savings from anti-poverty programs, including Medicaid and food stamps. It also will bank on an acceleration in economic growth.
One key to the fiscal math underlying the plan will be successive cuts to a category of spending known as non-defense discretionary spending. That category excludes benefits for which people automatically qualify, such as Social Security, but includes all the programs that Congress passes legislation to fund each year, including law enforcement, job training, scientific research and infrastructure.
In Trump's plan, "every single year we see those reduced by 2 cents on the dollar, every single year," Mulvaney told reporters Monday.
Those small cuts would add up. Non-defense discretionary spending would fall from $619 billion in fiscal year 2017 to $429 billion in 2027. Relative to the size of the economy, that would be more than a 50 percent cut.
Thanks partly to the broader pressures on the federal budget, such as the retirement of the Baby Boom generation, non-defense discretionary spending has been squeezed in recent years. The Budget Control Act, signed by President Barack Obama in 2011, set caps on that category of spending, which have lowered spending as a share of economic growth, although Congress has relaxed the limits in successive years. Even without Trump's cuts, non-defense, appropriated spending was set to decline to the lowest level on record, with data going back to 1962, according to the Center on Budget and Policy Priorities, a left-of-center think tank.
Further reductions to discretionary spending, however, would be some of the hardest to get to President Trump's desk. Such cuts would have to be approved by congressional appropriators, who would be unlikely to go along with Trump's plans. In May, Trump signed a spending bill for the rest of fiscal 2017 that did not include the discretionary spending cuts he sought. He would have to drive much tougher bargains in each year ahead, extending beyond his first and second terms.
Nevertheless, the proposal indicates that many government programs will continue to face lower funding in the years ahead.
The cuts would be one part of the Trump strategy for balancing the budget within 10 years. The document also will assume that Trump's tax reforms, regulatory relief and trade policies will accelerate economic growth to 3 percent annually, an assumption regarded by budgeteers as highly optimistic.
Also, it will call for cutting Medicaid spending more than envisioned by the House-passed GOP Obamacare replacement bill and tighten controls on spending on food stamps, low-income tax credits, and other social programs.