President Trump released a fiscal year 2020 budget Monday that relies on sunny projections for economic growth and trillions in budget cuts to achieve the goal of balancing the budget by 2034.
Trump calls for $2.7 trillion in spending cuts over the next 10 years through major decreases in domestic spending. Much of that would be achieved through $1.9 trillion in cuts to entitlement spending.
The budget also proposes $8.6 billion in new funding for Trump’s promised Mexican border wall.
The budget is a proposal for spending and taxing over the next 10 years and, like other recent presidential budgets, is dead on arrival in Congress. But it sets Trump’s priorities for government funding for next year. Budget talks will heat up in the next several months as Congress and Trump look both to fund the government and raise the federal debt ceiling before fall deadlines.
While cutting domestic discretionary spending for this coming year across the board, the Trump administration will ask Congress for significant increases in defense and veterans affairs spending. The administration plans to ask for $750 billion in new defense spending, up from an expected total of $716 billion in the current fiscal year.
The budget also includes $200 billion in new infrastructure spending, which the administration claims can be leveraged into $1 trillion in total infrastructure investment. A senior administration official who briefed reporters declined to provide specifics, instead saying that the administration would leave details up to Congress.
Today’s budget would also create $50 billion in new education tax credits aimed at private school tuition. The administration also proposes new work requirements for Medicaid, housing assistance, and other welfare programs.
Domestic discretionary spending — that is, all funds appropriated each year by Congress except for those for the military — would decrease by 5 percent next year under the budget. Most federal spending, however, is dedicated to programs that spend out money automatically, without annual congressional appropriations, such as Social Security, Medicare, and interest on the accumulated debt.
Balancing the federal budget would be a difficult undertaking. The Congressional Budget Office projects deficits of over $1 trillion per year starting in the 2022 fiscal year, at current tax and spending levels. The CBO’s forecast is rosy in that it expects the Republican individual tax cuts signed into law in 2017 to expire in 2025 and does not officially forecast a recession over the next decade. In total, the CBO expects deficits to total $11.6 trillion for the decade, barring significant changes to spending, taxes, or an economic recession.
Unlike the CBO’s projection, the administration’s extended budget window expects those individual tax cuts to continue permanently, which would require a new law to be passed by Congress and signed by Trump or a future president.
“We will extend the tax cuts and make it permanent,” said a senior administration official on a press call.
Past Republican budgets have sought to balanced the budget in 10 years, rather than the 15 years set out in the Trump budget, but that goal has become hard to achieve even on paper.
The Trump administration’s economic projections are far more optimistic than those of other government agencies and private forecasters. For example, it projects 3.2 percent real GDP growth for 2019, whereas the Federal Reserve and CBO both expect 2.3 percent.
