On Monday, March
11, President Trump released his proposal for the last meaningful budget of his
first term. It will cover the period
from October 1, 2019, until five weeks before the 2020 presidential election. To avoid either a pre-election government
shutdown or embarrassing pre-election concessions, the President and Congress
will almost certainly agree to a continuing resolution to cover the
pre-election period, with the final 2021 budget’s contours determined by the
election’s victors. This is, therefore, President
Trump’s final opportunity to insert his priorities into law during this term.
The popular media
has done a fair job of capturing the broad themes: large increases in defense spending, making upper-income
2017 tax cuts permanent, and a partial offset of those costs with dramatic cuts
in programs assisting low- and moderate-income people. President Trump also manages, in one
document, to breach all three parts of his campaign promise
not to support cuts in Social Security, Medicare, and Medicaid. The purpose of this post is to provide a few
specifics and to discuss what comes next, procedurally and politically.
The Congressional
Budget Act makes the President’s submission of a budget proposal the de facto start of the annual budgeting
process. It was due in early February,
but the partial federal government shutdown made that impossible as budget
proposals build on the current year’s budget, which was still unresolved. Historically, presidents’ budget proposals have
been a mix of serious proposals for the more mundane “housekeeping” parts of
the federal budget and aspirational proposals that the President knows Congress
is unlikely to accept as-is. The mix
between practical and ideological proposals has shifted over the years.
A few customary ground
rules have applied to presidential budget proposals, although some of these norms
are becoming quite frayed. The president’s
budget proposal is typically the high water mark for his party’s
initiatives: the opposing party cites
the president’s budget much as trial lawyers cite party admissions to reject
out of hand any proposals going farther.
This practice has discouraged realistic presidential budget proposals. Thus, during the Clinton and Obama
Administrations, congressional Democrats could expect no traction for social
initiatives not in that year’s presidential budget proposal. President Trump has not felt bound by this
tradition: his proposals for a border
wall, for example, evolved repeatedly from last year’s budget proposal.
Presidents also express
their aspirations for overall fiscal effects – the size of deficits or
surpluses and the division of funds between defense and non-defense programs –
in their budget. The seriousness of
these aspirations can be assessed by the degree to which the budget depends on accounting
gimmicks or proposals that obviously lack congressional support.
Since the Budget
Control Act of 2011, presidential budgets also have had to take a position on
whether they will adhere to the draconian caps on annual appropriations (“discretionary
spending”) that that law and its subsequent sequestration imposed. No president or Congress since then has found
a palatable way to operate the federal government within those funding
constraints. As a result, Congress has
passed and presidents have signed a series of bipartisan deals increasing those
caps for two years at a time, offsetting part of the cost with cuts in domestic
entitlement programs. The most recent
such deal, signed by President Trump, expires at the end of the current fiscal
year.
Even by the
standards of recent presidential budgets, President Trump’s proposal is quite
extreme. He does not propose new
legislation raising the caps on discretionary spending, which would force
Congress to write appropriations bills to fit within the “sequestration”
limits. This would mean
an 11% average cut in non-defense discretionary (NDD) spending in 2020 below
the current year’s levels after adjusting for inflation. Because he proposes large increases for the
Department of Homeland Security, which falls within the NDD category, the
actual cut he would require from other programs would be even greater. The President’s budget assumes further
reductions in NDD spending in future years:
by 2021, it would be the smallest share of the economy since the Hoover
Administration and over ten years it would drop 40% after adjusting for inflation. Apparently recognizing that these cuts are
politically untenable, the Administration is claiming
that they are much smaller than they are.
Although President
Trump’s budget purports also to apply the comparably severe caps on defense
spending, it evades the effect of those caps with a giant accounting gimmick. It transfers substantial amounts of regular
Pentagon spending into a special category, Overseas Contingency Operations
(OCO), that is exempt from the caps. OCO
was intended to pay the special costs of the wars in Afghanistan and Iraq on an
emergency basis. The Pentagon has long
reclassified parts of its regular operating budget as OCO, but President Trump’s
converts this stream of extra Pentagon funding into a raging torrent: defense spending designated as OCO would jump
from $69 billion to $165 billion in a single year. This obliterates the Budget Control Act’s
commitment to have defense and non-defense spending subject to parallel
constraints. Both Mick Mulvaney, the
President’s Chief of Staff and former budget director, and former House Speaker
Paul Ryan harshly
criticized
much more moderate abuses of the OCO device when they were in Congress.
Even the President’s
proposals for non-defense discretionary spending do not appear designed to be
taken seriously. For example, he would cut
$5 billion from the National Instituted of Health, which enjoy broad bipartisan
support. He would terminate low-income
energy assistance and the Community Services Block Grant, which funds the
remnants of War on Poverty service programs. Even Republican Congresses have ignored deep cuts
proposed for these programs in the past.
He would slash
the Job Corps and dislocated worker programs serving the very people for whom he
claims his trade war is being fought. Few
in Congress will want to be associated with those cuts.
Most of the President’s
supposed domestic initiatives in the budget also are gimmicks. He boasts of a new fund of money for
infrastructure but appears to cut transportation and housing funds by even
more, resulting in a net reduction in federal infrastructure spending. He claims to be launching major efforts
against the opioid
epidemic and HIV, but he would deeply cut Medicaid – the primary source of
treatment funding for many fighting addition and HIV infection – with the
result that fewer total resources would be available.
Critics are no
doubt correct that this budget proposal will be “dead on arrival” in
Congress: almost all presidential budget
proposals are. It nonetheless remains
significant for several reasons. First,
it provides a comprehensive statement of this Administration’s values and priorities. It makes the 2017 upper-income tax cuts
permanent – at a cost
of $275 billion in 2028 alone – at the same time it would impose
30% reductions in food stamps as well as deep cuts in Social Security
Disability Insurance, Supplemental Security Income for the elderly and disabled,
Medicaid, and family income support.
Second, the
President’s proposal to replace the Affordable Care Act with an inadequately
funded block grant – along with his proposed Medicare cuts – confirms that the
Act has now become firmly entrenched.
Republicans will continue to condemn the Act, but few will want to run
on this proposal in the 2020 elections.
Even if Republicans win, they will have no mandate to launch another
effort to repeal the Act. The Act’s
entrenchment has important broader
implications for U.S. public law.
Finally, the
budget proposal’s insistence on adhering to the sequestration spending caps,
however disingenuous, suggests that the Administration will resist negotiating
a new bipartisan agreement to raise those caps.
Neither party’s appropriators are likely to want to vote for bills containing
such draconian cuts. The House likely
will pass a “deeming resolution” waiving points of order against considering
bills over the caps. Senator McConnell
likely will be reluctant to do the same so the Senate may be unable to bring
appropriations bills to the floor. In
any event, neither chamber probably can pass appropriations bills at the
sequestration levels, and without such legislation appropriations above that will
result in new automatic across-the-board budget cuts.
Postponing all the
complex, contentious decisions that appropriations entail to the last minute
will greatly increase the chance that a snag will trigger another federal
government shutdown. That is already a significant
likelihood
because Democrats and some Republicans will want to insulate appropriations
accounts from “emergency” transfers to build the President’s proposed border
wall.