Trump Presents Election-Year Budget Based on Lofty Growth Assumptions

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Trump Presents Election-Year Budget Based on Lofty Growth Assumptions

With months left before U.S. elections, President Donald Trump unveiled a budget roadmap on Monday that abandons key deficit cutting promises based on lofty and unlikely economic growth assumptions.

The final spending plan of Trump's first term in office faces near certain defeat in the Democrat-controlled House of Representatives, but offers a window into the administration's priorities.

The budget makes cuts to social programs, environmental protections and foreign assistance, to fund higher defense spending and extend tax cuts for wealthy individuals and companies, according to officials and multiple U.S. media reports.

The proposal again abandons the stated goal of closing the budget deficit in 10 years, instead pushing the target date back to 2035.

However, even that extended timeline assumes the U.S. economy will grow by 3.0 percent a year or close to it through 2030, which would support higher tax revenues, something not achieved consistently in over a decade, and unheard of for an economy after 11 consecutive years of growth.

Despite pledging to pursue the Republicans' long-held war on deficits, the Trump administration has shown little interest in tackling the issue, with the gap expected to hit $1 trillion this year amid growing government debt — double the estimate in his first budget.

The $4.8 trillion spending proposal for this year calls for $2 trillion in cuts to non-defense programs, including safety nets such as food stamps, and savings from the Medicare prescription drug coverage.

Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, offered praise for some of the policies in the budget but called for serious action to reduce deficits.

"We don't need more false promises about rapid economic growth or tax cuts that will pay for themselves. We need action to reverse our trillion-dollar deficits, save our largest trust funds, and prevent debt from reaching new record highs," she said in a statement.

"Frankly, budgeting has become pretty much a joke in this country, where budgets are used as messaging documents and an excuse to trade insults. This year's trillion-dollar deficit should cause us to re-think this dynamic."

Office of Management and Budget Acting Director Russell Vought speaks during a television interview at the White House, Feb.10, 2020 in Washington.

Cutting critical lifelines 

Russell Vought, Trump's acting budget director, said Monday the proposal will include over $740 billion for defense spending, including a 20% increase for nuclear modernization.

And the massive $1.5 trillion in tax cuts, mostly benefitting the wealthiest, will be extended beyond 2025.

Democratic House Speaker Nancy Pelosi lambasted the proposal.

"The budget is a statement of values and once again the president is showing just how little he values the good health, financial security and wellbeing of hardworking American families," she said in a statement.

"Year after year, President Trump's budgets have sought to inflict devastating cuts to critical lifelines that millions of Americans rely on."

But Vought defended the plan and called on Democrats to approve the required spending cuts.

"This is a budget reflection built upon the pro growth economic policies of this president, which have unleashed one of the most powerful economies in American history," he told reporters as he presented the spending and revenue plan.

But he said it is necessary to restrain non-defense spending and "time to rethink" aid, which is why Trump calls for a 21% reduction for foreign aid.

Trump Again Proposes Big Cut to Foreign Aid

Foreign assistance would be slashed by 21% if the president's budget for the next fiscal year is approved by Congress, which seems unlikely

He also defended the 3.0% growth targets saying in an interview with CNBC that the estimates are "entirely possible to be able to hit in the next 10 years."

Trump's plan calls for $2 billion in homeland security spending for the U.S.-Mexico border wall, boosts spending for NASA by 12% while slashing the Environmental Protection Agency by more than 26%.

Budget expert MacGuineas said the proposal includes some important policy reforms to put deficits on a downward path.

"But when you peel away the rosy growth assumptions, the assumed reversal of spending increases the President has already signed into law, and the exaggerated and unspecified savings, we are still left with a mountain of debt."
 

February 11, 2020 at 05:32AM