Plan aims to stimulate improvements to crumbling infrastructure
U.S. President Donald Trump has unveiled a $4.4-trillion US budget for next year that heralds an era of $1 trillion-plus federal deficits and — unlike the plan he released last year — never comes close to promising a balanced ledger even after 10 years.
The growing deficits reflect, in part, the impact of last year's tax overhaul, which is projected to cause federal tax revenue to plummet. And Monday's budget submission does not yet reflect last week's two-year bipartisan $300-billion pact that wholly rejects Trump's plans to slash domestic agencies.
Tax revenue would plummet by $3.7 trillion over the 2018-27 decade, the budget projects.
The spending spree, along with last year's tax cuts, has the deficit moving sharply higher with Republicans in control of Washington. Trump's plan sees a 2019 deficit of $984 billion, though $1.2 trillion is more plausible after last week's budget pact and $90 billion worth of disaster aid is tacked on. That's more than double the 2019 deficit the administration promised last year.
All told, the new budget sees accumulating deficits of $7.2 trillion over the coming decade; Trump's plan last year projected a 10-year shortfall of $3.2 trillion.
The 2019 budget was originally designed to double down on last year's proposals to slash foreign aid, the Environmental Protection Agency, home heating assistance and other non-defence programs funded by Congress each year.
"A lot of presidents' budgets are ignored. But I would expect this one to be completely irrelevant and totally ignored," said Jason Furman, a top economic adviser to President Barack Obama. "In fact, Congress passed a law last week that basically undid the budget before it was even submitted."
In a preview of Monday's release, the White House on Sunday focused on Trump's $1.5-trillion plan for crumbling infrastructure. He also is asking for a $13-billion increase over two years for opioid prevention, treatment and long-term recovery. A request for $23 billion for border security, including $18 billion for a wall along the U.S.-Mexico border and money for more detention beds for detained immigrants, also is part of the budget.
Trump would again spare social security retirement benefits and Medicare as he promised during the 2016 campaign. And while his plan would reprise last year's attempt to scuttle the Obamacare health law and sharply cut back the Medicaid program for the elderly, poor and disabled, Trump's allies on Capitol Hill have signalled there's no interest in tackling hot-button health issues during an election year.
The budget also endorses a plan by Republican Senators Lindsey Graham, of South Carolina, and Bill Cassidy, of Louisiana, to replace the Obama-era health law with $1.6 trillion in subsidies to states over the coming decade.
The plan also reprises proposals from last year's Trump budget to curb crop insurance costs, cut student loan subsidies, reduce pension benefits for federal workers and cut food stamps, among other proposals.
Mick Mulvaney, the former Tea Party congressman who runs the White House budget office, said Sunday that Trump's new budget, if implemented, would tame the deficit over time.
"The budget does bend the trajectory down, it does move us back towards balance. It does get us away from trillion-dollar deficits," Mulvaney said on Fox News Sunday.
"Just because this deal was signed does not mean the future is written in stone. We do have a chance still to change the trajectory. And that is what the budget will show tomorrow."
Last year, Trump's budget projected a slight surplus after a decade, but critics said it relied on an enormous accounting gimmick — double counting a 10-year, $2-trillion surge in revenues from the economic benefits of "tax reform." Now that tax reform has passed, the math trick can't be used, and the Trump plan doesn't come close to balancing.
Trump plan also promises three per cent growth, continuing low inflation, and low interest yields on U.S. Treasury bills despite a flood of new borrowing, underestimates the mounting cost of financing the government's $20 trillion-plus debt. Many economists are likely to find the prospects for such a rosy scenario implausible.
The White House is putting focus this year on Trump's long-overdue plan to boost spending on the nation's crumbling infrastructure. The plan would put up $200 billion in federal money over the next 10 years to leverage $1.5 trillion in infrastructure spending, relying on state and local governments and the private sector to contribute the bulk of the funding.
Critics contend the infrastructure plan will fail to reach its goals without more federal support. Proposals to streamline the permitting process as a way to reduce the cost of projects have already generated opposition from environmental groups.