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White House budget proposes increase to defense spending, cuts to safety net; federal deficit would remain

Published Feb. 12, 2018

Washington PostWASHINGTON — The White House released a tax-and-spending plan Monday that would not eliminate the federal budget deficit after 10 years, its first public acknowledgment that large spending increases and the $1.5 trillion tax cut are putting severe pressure on the government's debt.

The proposal, titled "Efficient, Effective, Accountable: An American Budget," sets forth President Donald Trump's priorities as Congress prepares to consider spending bills for the next fiscal year.

It would continue to markedly increase military spending and set aside money for a wall along the U.S.-Mexico border.

The plan also calls for major cuts to Medicare, Medicaid, food stamps and other social programs, reductions that conservatives have long sought.

In addition, the White House is seeking to cut more than $2.5 billion from the annual budget of the Environmental Protection Agency — an overall reduction of more than 23 percent — marking the Trump administration's latest attempt to shrink the reach of an agency that the president once promised to reduce to "little tidbits." The EPA already has lost hundreds of employees to buyouts and retirements over the past year, and its staffing is now at Reagan-era levels.

But even with these reductions, which add up to more than $3 trillion in cuts over 10 years, the proposal wouldn't bring the budget into balance because of the lost tax revenue and higher spending on other programs.

The White House projects a large gap between government spending and tax revenue over the next decade, adding at least $7 trillion to the debt over that time. In 2019 and 2020 alone, the government would add a combined $2 trillion in debt under Trump's plan.

Even with upbeat economic forecasts and numerous proposed cuts to social programs, most of which will be dead on arrival in Congress, the Trump administration projects that it would run a deficit of $450 billion in 2027.

Last year, the White House projected its tax and spending proposals would lead to a budget surplus of $16 billion in 2027, which meant the government would have brought in more money through taxes than it spent on programs, something last accomplished in 2001.

The budget plan was met coolly by many Republicans.

"Budgets are aspirational documents and seldom have a real impact on spending," said Rep. Mark Meadows, R-N.C., chairman of the conservative Freedom Caucus.

Democrats, though, reacted with hostility, saying it confirmed their long-held belief that Trump would pivot from large tax cuts for corporations to a push to scale back government benefits for low-income Americans.

"The Trump budget proposal makes clear his desire to enact massive cuts to health care, anti-poverty programs, and investments in economic growth to blunt the deficit-exploding impact of his tax cuts for millionaires and corporations," said Kentucky Rep. John Yarmuth, the top Democrat on the House Budget Committee. "These cuts to critical federal investments are so extreme they can only reflect a disdain for working families and a total lack of vision for a stronger society."

The biggest factor in the White House's deficit problems appears to be issues caused by the tax law, which the administration had previously refused to acknowledge would occur.

The White House had promised that last year's tax cut plan would pay for itself by generating so much revenue that it wouldn't add to the deficit. This ran in sharp contrast to numerous forecasts that found it would add $1 trillion to $2 trillion to the debt over 10 years.

Monday's budget proposal paints a much different picture of the tax plan's eventual effect compared to what the Treasury Department and the White House had projected. It forecasts that tax revenue will plummet in the next few years and never recover to the levels forecast before the tax plan was enacted in December.

It projects that tax receipts will be $314 billion lower in 2018 than it forecast last year and almost $400 billion lower in 2019.

Republicans have long called for eliminating the budget deficit, but Trump has ushered in a new economic strategy, jettisoning deficit fears in favor of a low-tax, high-spending model that he thinks will boost the economy. The budget and deficit problems actually may be much worse than the White House's budget sets forth. That's because some of the cuts would be difficult to pass through Congress.

For example, the budget would cut $554 billion from Medicare spending over 10 years. Medicare is the federal program that provides health benefits to older Americans, and more than 55 million people used the program last year.

It also would make changes to Medicaid, the health program for lower-income Americans that's funded by the federal government and states. It would create a "market-based health care grant" that could fund programs in addition to the traditional Medicaid program, a change that would lower Medicaid spending by about $250 billion over 10 years.

One program that would face the biggest reduction is the Supplemental Nutrition Assistance Program, which is a version of food stamps run by the Agriculture Department. The White House proposes cutting $214 billion from the program over 10 years. Congress often fights about changing SNAP but rarely has enacted changes.

Other parts of the White House's budget are less defined. For example, it proposes to save $139 billion over 10 years by reducing "improper payments government wide."

Trump's budget assumes even hotter growth in the coming years than Wall Street economists predict, which is significant because this dynamic helps them increase projected tax receipts. It relies on growth hitting 3.1 percent this fiscal year and staying above 3 percent through 2024, a sustained stretch that hasn't occurred since the 1980s.