President Trump’s first budget request would stake out a radically different path from the past budgets set out by former President Barack Obama, but it also makes a key departure from budgets that Republicans have proposed.
One of the biggest differences between the Trump budget and the prior Obama budgets is that Trump’s plan would balance the budget in 10 years, just as some House Republican plans have done.
Trump’s budget was written “through the eyes of people who are actually paying the taxes,” said Office of Management and Budget Director Mick Mulvaney Monday, suggesting that it hasn’t been done that way in recent years. It would call for major reductions in safety net spending and on a wide range of government programs.
Obama’s fiscal year 2017 budget, on the other hand, was meant “to replace mindless austerity with smart investments that strengthen America,” Obama said at the time it was unveiled. While it contemplated new spending for infrastructure, child care programs and education, it would have never balanced. In protest, the Republican chairmen of the budget committees refused to even call the traditional hearings with Obama’s budget director.
Obama’s budget saw federal spending rising from around 21 percent of economic output to just under 23 percent in 2026. By calling for about $3.1 trillion in tax increases, deficits and debt would have remained roughly steady.
In comparison, Trump seeks to drive spending down from 21 percent of gross domestic product to just under 18.5 percent by 2027 and cut the national debt by about a fifth. The decline in spending relative to the economy would partly reflect that Trump’s budget counts on economic growth picking up. Even so, getting spending that low would require politically implausible spending cuts.
To start, Trump’s budget would effectively cut spending on all the things the federal government actually does, outside of defense, in half. Through the “two-penny plan,” nondefense discretionary spending would roughly fall to half of its current size relative to the economy in Trump’s budget, even though Trump wasn’t able to negotiate cuts for fiscal year 2017.
Then, the budget would reduce safety net spending, including Medicaid, disability and welfare programs by $1 trillion.
Getting Congress to find those savings in anti-poverty programs would be a near-impossible task. Asked Monday evening if Republicans would support large cuts to safety net programs, Sen. Pat Roberts, R-Kan., said “no.”
But a presidential budget is simply a request to Congress and thus is an indication of the direction the administration would like to stake out. To some fiscal conservatives, merely the fact that Trump seeks to balance the budget is enough.
“After eight years of having a White House that is not interested in cutting spending, it is refreshing to have a White House that is finally willing to tackle this,” said Andy Roth, vice president of government affairs at the Club for Growth, a group that backs fiscally conservative politicians.
The fact that Trump personally ruled out changes to Medicare and Social Security, two of the biggest drivers of federal spending in the years to come, is “immaterial,” Roth added.
Trump’s hands-off approach to Medicare, the old-age healthcare program, is at odds with the strategy devised by Paul Ryan during his tenure as the House Budget Committee chairman and that became a staple of the GOP agenda before the Trump era.
For instance, the fiscal year 2017 budget authored by then-Budget Committee Chairman Tom Price, now Trump’s Health and Human Services secretary, would have balanced in part by saving just under $450 billion in Medicare funds by moving the program to a premium support model. Under that plan, beneficiaries would receive subsidies to buy private plans or to buy into traditional Medicare.
Many fiscal conservatives in Congress don’t want to back away from that approach. “They’re going to need to be touched eventually,” said Rep. Bill Flores, a conservative from Texas. “At the end of the day, the budget that counts is the budget we pass in Congress.”
Partly because Trump’s budget does not call for lower spending on retirement programs, it requires steeper cuts elsewhere to reach balance, as well as relying on faster economic growth.
The White House budget forecasts that its policies will accelerate GDP growth to 3 percent annually by 2021, adjusted for inflation, a major difference from current forecasts. The Congressional Budget Office, for instance, projects that growth will settle below 2 percent.
Assuming that faster growth makes the budget math much easier. Because more people would be working and paying more taxes while needing fewer benefits in that scenario, revenues would be higher by $2 trillion over the decade. In comparison, Price’s budget from last year only included $241 billion for a comparable number.
