With the President across the ocean, the Trump Administration released its long-awaited FY 2018 budget blueprint, which seeks to bring the federal government back into the black by 2027, primarily by slashing domestic programs and relying on future economic growth generated from across-the-board tax cuts.
As with most presidential budget submissions, this one is mostly dead on arrival. Congressional leaders on both sides of the political aisle panned much of the proposal and are expected to push back against many of the more egregious spending cuts.
Here is a breakdown of the 1,288-page, $4.094 trillion budget, which has some good provisions, a lot bad ones and a fair amount of deception.
FY18 Budget - The Good
Trump proposes a $1 trillion infrastructure plan with $200 billion of actual government spending over 10 years. Unfortunately, the proposal remains short on details, but we expect the funds to be available for a wide range of projects, including transportation, broadband, housing and veterans affairs. Here is what the Administration has to say about the Infrastructure Package:
“The President’s target of $1 trillion in infrastructure investment will be funded through a combination of new Federal funding, incentivized non-Federal funding and newly prioritized and expedited projects. While this Administration proposes additional funding for infrastructure, we will structure that funding to incentivize additional non-Federal funding, reduce the cost associated with accepting Federal dollars and ensure Federal funds are leveraged such that the end result is at least $1 trillion in total infrastructure spending. While we will continue to work with the Congress, states, tribes, localities, and other infrastructure stakeholders to finalize the suite of Federal programs that will support this effort, the 2018 Budget includes $200 billion in outlays related to the infrastructure initiative.”
FAST Act Levels… For the Most Part
The budget generally funds all highway and transit programs at FAST Act funding levels. This ensures full funding of a host of programs that directly benefit municipal governments and transit agencies. However, the New Starts Program was limited to projects already in the queue and thus the Administration is suggesting they do not want to fund any new commuter rail or bus rapid transit projects. Fortunately, Congress will likely restore these funds.
Clean Water Infrastructure Maintained
The budget seeks to fulfill Trump’s promise to promote clean water and build water infrastructure, including in communities like Flint, Michigan. The Administration resisted the impulse to cut this program and proposes $2.3 billion for the State Revolving Funds, a slight increase of $4 million from 2017. Trump also provides $20 million for the Water Infrastructure Finance and Innovation Act program.
COPS Hiring Bumped Up and AFG Maintained
Two popular public safety grant programs are protected in the budget. DOJ’s COPS Hiring Program would be increased to $207 million while Assistance to Firefighter and SAFER grants would be funded at roughly FY 17’s level.
Tax Cuts for Everyone
For those of us that like ice cream with no calories, this one is for you. The Trump Administration includes approximately $3.6 trillion in tax cuts for individuals and corporations. This would be the largest tax cut in US history.
FY18 Budget – The Bad
The Trump Administration stayed true to its campaign rhetoric and proposed increasing DOD’s budget by $54 billion in 2018. Unfortunately, this increase will be offset dollar-for-dollar by domestic program cuts, so it’s good or bad depending on your point of view.
Important Programs for Municipalities Eliminated
Staying true to the March budget outline, the full budget eliminates the TIGER program, CDBG, HOME, EDA, National Endowment for the Arts, National Endowment for the Humanities and Institute of Museum and Library Services. It also zeroes out the $150 million Essential Air Service that subsidizes commercial flights to rural airports and New Starts grants that fund new transit programs.
Funding for Medicaid, the health-care program for low-income Americans, and Children’s Health Insurance (CHIP) would be cut even more than the $880 billion over 10 years contained in the House-passed American Health Care Act. Funding for the Supplemental Nutrition Assistance Program, a modern version of food stamps that provided benefits to 44 million people in 2016, would be cut by 29 percent. The Administration also cuts $72 billion from the Social Security Disability Insurance program.
Sanctuary Cities Expanded
The budget includes a legislative change that would significantly broaden the definition of sanctuary cities, threatening more jurisdictions with prospect of noncompliance.
Trump’s budget would slash the National Institutes of Health’s funding by nearly $6 billion, a nearly 20 percent reduction.
School Choice Comes at a Price
In an effort to reduce the government’s role in public education, the Trump budget sends an extra $1.4 billion to the school choice program. However, the budget also places dozens of schools programs on the chopping block, including 21st Century Community Learning Centers, after-school and summer learning programs.
Rural Areas Cut
Trump eliminates the Rural Business-Cooperative Service, the water and wastewater direct loan and grant program and the single family housing direct loan program.
Selling Transmission Assets
While it’s short on details, the budget includes a proposal that would authorize the federal government to sell off publicly owned transmission assets operated by the Bonneville Power Administration.
EPA Targeted More than Most
The White House allocated just $5.7 billion for the Environmental Protection Agency, slashing its budget by $2.4 billion compared to FY 17. The move calls for the elimination of several EPA grant programs, including programs aimed at slowing climate change and cleaning up contaminated sites. On Page 164 of the EPA budget proposal, Trump’s team sliced into the budget to clean up Puget Sound. There didn’t seem to be any mention in the budget proposal of the Portland Harbor cleanup.
FY18 Budget – The Deceptive
The Trump Administration relies on some rosy forecasts to cut taxes and balance the budget in 10 years. According to the Committee for a Responsible Budget:
“In constructing its budget numbers, the President’s budget uses much more favorable economic growth assumptions than CBO, projecting average real growth of 2.9 percent over 10 years compared to 1.8 percent in CBO’s projection. Part of this is due to the Office of Management and Budget (OMB) assuming higher baseline growth of 2.2 percent, while the rest comes from the budget’s effects on growth.
OMB often assumes faster growth than CBO, in part because its growth estimates are inclusive of the President’s presumably pro-growth policies. Yet in the past two decades, OMB’s growth estimates have averaged just 0.2 points above CBO’s, with the largest difference being 0.4 points. The 1.1 percentage point difference between this budget and CBO is an outlier. Higher growth rates lead the budget to show much lower debt levels than would otherwise be the case, mainly due to higher projected tax revenue. Higher growth also means a larger economy and therefore lower debt and deficits as a share of GDP. OMB estimates nominal GDP will be 11 percent higher by 2027 than what CBO estimates.
In large part due to this growth, OMB projects debt under the President’s budget to fall from 77 percent of GDP ($14.2 trillion) today to below 60 percent of GDP ($18.6 trillion) by 2027. By comparison, our rough estimates suggest debt would total 76 percent of GDP ($21.3 trillion) using CBO’s economic assumptions. In other words, debt would be 16 percent of GDP and $2.7 trillion higher using CBO’s economic projections than it would be under OMB’s.”
Michael Skipper, Federal Affairs Associate, brings valuable Pacific Northwest-focused policy and political experience to CFM’s Washington, D.C., office.