President Trump on Monday released his final budget proposal ahead of the 2020 elections. Though the budget contains some laudable proposed cuts to wasteful spending, in keeping with his campaign pledge, it avoids any large-scale changes to Medicare and Social Security. This marks another missed opportunity to address the major drivers of the nation’s looming debt crisis.
The Trump budget, to be sure, does claim $4.6 trillion in deficit reduction over the next decade, but, to get there, the budget relies on optimistic projections that assume that economic growth will remain strong for the next 10 years and that interest rates on the debt will remain at low levels.
Trump’s proposal would also slow the growth of nondefense spending, cut foreign aid, add work requirements to food stamps and Medicaid, and include similar reforms to Medicare as those President Barack Obama proposed, such as changing the way medical providers are paid.
But Trump avoided any sort of sweeping, Paul Ryan-style reforms to the nation’s broken entitlement system.
Anticipating criticism from budget hawks ahead of the release of the plan, White House Office of Management and Budget acting Director Russell Vought told journalists, “If you’re someone who cares about spending, is there any other game in town? There’s no one out there that’s putting forward spending reductions other than this president.”
As far as it goes, this is true. After all, the signature proposal of Sen. Bernie Sanders, arguably the front-runner to win the Democratic presidential nomination, wants to expand Medicare and offer free coverage at a cost of $34 trillion.
Yet, the Republican Party, which once made overhauling Medicare a central part of its identity, has now decided that touching programs for older people is too much of a political loser.
Deciding not to care about the issue has not made it go away. Debt as a percentage of the economy is projected to be 81% this year, according to the Congressional Budget Office, which is higher than at any point in history other than World War II, and that’s during a time of strong economic growth, low interest rates, and relative peace. Within 13 years, barring changes, the debt-to-GDP ratio is projected to reach the World War II-era record of 106%. By the end of the projection period, in 2050, when today’s babies will be trying to start their own families, debt is supposed to reach a whopping 180% of GDP.
The biggest driver of the increase has been the increase in the retirement population, coupled with rising healthcare costs, which has dramatically expanded spending on Social Security and Medicare. In 1968, when the earliest baby boomers were at college graduation age, those two programs accounted for about 16% of the federal budget. Now, they are over 40%. Any plan that tries to address the deficits without seriously reforming entitlements is going to have to lean heavily on discretionary spending cuts and optimistic economic assumptions, as Trump does.
What’s more, the budget outlook has gotten worse under Trump, who, despite proposing spending cuts, has ultimately signed on to whatever deals are struck by Congress, as he did last summer when he agreed to a spending pact that would punt the issue until after the election. Trump’s first budget projected the federal government would run a total of $3.2 trillion in deficits from 2018 to 2027. Combining results from 2018 and 2019 that are already in the books with the revised projections, the Trump proposal is now expecting $7.5 trillion in deficits over the same time frame.
Though we were not holding our breath for Trump to introduce a major overhaul of entitlements in an election year, it’s worth recognizing that his proposal was deemed “dead on arrival” by congressional Democrats anyway. The prospect of addressing the issue has never been further out of reach politically, and, yet, the more time lawmakers waste, the more severe the trade-offs between crushing tax increases and significant benefits cuts will have to be once the day of reckoning arrives.
