President Donald Trump’s $4.8 trillion election year budget seeks to balance painful reductions in domestic and foreign aid programs that are certain to draw scorn from lawmakers, with openings for bipartisan deals on prescription drug pricing and infrastructure.
The plan envisions steadily falling deficits — which are set to hit nearly $1.1 trillion this year — until ultimately they are eliminated after 15 years. No new tax cuts are proposed, but the budget asks to make individual tax cuts that are set to expire after 2025 permanent, at a cost of $1.4 trillion over 10 years. And Trump's advisers have said more tax cuts could be floated later this year, as the legislative calendar winds closer to November, when the president faces voters once more.
Congress is unlikely to adopt many of the proposals in the budget. But a senior administration official, speaking on condition of anonymity to describe details in advance of Monday's release, said the White House is optimistic about reaching an agreement with Congress on prescription drugs.
The budget blueprint leaves out specifics in order to preserve breathing space for congressional committees negotiating a drug proposal, but it assumes $135 billion in net deficit reduction from lower drug costs over a decade. That's a figure more in line with what Senate Finance Committee leaders have pitched than a more expansive House-passed bill, which Democrats chanted their support of during Trump's primetime State of the Union address last week.
Trump also ostensibly proposes $1 trillion in infrastructure spending over 10 years, up from a roughly $200 billion proposal last year. Much of the new funding is necessary simply to keep up with current costs of surface transportation programs, plus a 10 percent boost above inflation. And there's another nearly $200 billion on top of that for "nationally significant projects," a senior administration official said.
The official conceded reaching a deal with lawmakers would be difficult regardless, however, since Democrats have proposed tax increases while the White House is seeking spending cuts elsewhere to offset the cost.
If the budget were enacted in full, the deficit would fall gradually from $966 billion in fiscal 2021 to $261 billion in 10 years, with the gap eliminated five years later, according to administration officials and summary tables obtained by CQ Roll Call.
Steep nondefense cuts
The plan proposes spending $740.5 billion on defense next year, including $69 billion in war funds. That matches the defense cap level in the 2019 budget deal (PL 116-37) agreed to by lawmakers and the White House.
The White House does not see a need for an emergency supplemental spending bill for the coronavirus outbreak or for an increased troop presence in the Middle East at this time, the administration official said.
Similar to past year budgets, the proposal would cut nondefense discretionary spending below statutory caps, starting with slicing the regular budget allotment for such programs by 5 percent to $590 billion in fiscal 2021.
But those cuts don't tell the full story, as last year's spending deal provided for an extra $8 billion in foreign assistance funding through the same warfighting classification the Pentagon received, known as overseas contingency operations or OCO. That extra money would be eliminated in the president's new budget. Altogether, the State Department and international assistance programs would be cut by 21 percent.
Other big losers include EPA with a nearly 27 percent cut, and everything unrelated to nuclear weapons at the Energy Department, which would face cuts of nearly 29 percent.
Those reductions help carve out room for major increases at NASA, which would get a 12 percent bump in part to help Trump put another astronaut on the moon before the end of a theoretical second term in office, and a 13 percent boost for the Department of Veterans' Affairs, which is facing rapidly rising health care costs. And while all other energy programs would see deep cuts, the National Nuclear Security Administration's budget would receive a 19 percent increase.
The overall cuts to nondefense discretionary programs would continue in future years, making room for annual increases in defense budgets of roughly 2 percent each year through 2025. Ultimately, defense spending would see OCO funding gradually wind down, and altogether the budget envisions some $2.4 trillion in 10-year cuts to discretionary spending from baseline forecasts, mostly from nondefense.
All-in, the budget plan would cut deficits by $4.6 trillion over the next decade — $4.4 trillion coming from spending cuts. On top of the discretionary cuts, there's $2 trillion in reductions to mandatory spending programs including Medicaid, and about $400 billion in interest cost savings. The White House projects that another $200 billion in savings would come from changes that would increase revenue, including requiring Social Security numbers for the child tax credit and earned income tax credit and eliminating energy tax breaks such as the plug-in electric vehicles credit.
Less for border wall
After emphasizing the importance of building a wall on the southern border since he first campaigned in 2016, Trump asks for just $2 billion for wall construction in the plan. The funds would pay for 82 miles of wall, an administration official said. The request is down from the $5 billion Trump requested as part of the Homeland Security bill last year. The budget does not request additional funding for the wall from the Pentagon.
An administration official said the White House believes that $2 billion is enough next year, since it is on top of the $18 billion that has been secured over the past three years, adding there is enough money in the pipeline at present. The official described the request as a return to a “steady state in terms of resources needed for the wall.”
The plan also doubles down on previous efforts to return more authority to the states in what the administration calls its federalism initiatives. Under one of the proposals, the White House proposes consolidating about 30 federal education programs into a block grant giving states more authority to use the money to design individualized programs. “If you’ve got a particular emphasis that you want on charter schools, use this funding for it,” the official said. “If you want to go in a different direction, you have that flexibility to do it.”
Rosy growth assumptions
The White House projects the economy will grow by an average of 3 percent a year if all of its proposals are adopted.
The administration said real, or inflation-adjusted, gross domestic product would grow by 3.1 percent in 2021, up from its estimate of 2.8 percent this year. The White House said growth would fall to 2.8 percent near the end of the 10-year period.
The administration forecast is considerably higher than the Congressional Budget Office's estimate that GDP will grow by 2.2 percent this year, 1.9 percent in 2021 and average 1.7 percent through 2030.
An administration official said the White House forecast is based in part on the expectation the 2017 tax cuts, which would be extended in the budget plan, will spur business investment and economic growth. The official also said that "phase one" of the trade deal reached with China as well as the U.S.-Mexico-Canada accord will spur faster growth.