Administration Delivers Another Budget Request Congress Will Largely Ignore

This week, the Trump White House released a summary of their FY 2020 budget request, and, to date, has not yet released the meat of any President’s budget: the agencies’ budget documents and OMB’s materials. Nonetheless, what we can discern from the budget request is that it’s largely the same as the previous two budget requests in that defense spending would see a spike and non-defense spending would largely get a spike through its heart. In short, this is the anti-Great Society budget.

Big picture, the Administration proposes to live within the Budget Control Act caps for FY 2020…sort of. Discretionary defense funding would be $576 billion and non-defense discretionary funding at $567 billion, which would be cuts of $71 billion and $55 billion compared to FY 2019 enacted funding. However, as floated recently by the Administration, they propose to use Overseas Contingency Operations (OCO) accounts to circumvent the cap of discretionary funding through a request of $165 billion, an OCO number not seen since the Afghanistan surge in FY 2011. Considering House Armed Services Committee Ranking Member Mac Thornberry (R-TX) has already given this ruse the thumbs down, I think we can assume this is not going to be the means by which the Pentagon is funded this year.

The “2-penny” proposal is back. As you may recall from last year’s request, the Administration is asking that Congress cut 2% from non-defense discretionary spending for the balance of the budget window, which, if enacted, would lead to $458 billion being spent on these programs in FY 2029, or a 26.1% decrease from FY 2019. Incidentally, defense discretionary funding would be $817 billion in FY 2029, a 14.1% increase from FY 2019.

On the programmatic side of domestic funding, the Administration is proposing cuts that would return the federal government to a pre-LBJ size and scope. Again, the Administration is asking Congress to repeal and replace the “Patient Protection and Affordable Care Act” (PPACA) with “legislation modeled after the Graham-Cassidy-Heller-Johnson bill proposed in September 2017.” The Administration is proposing repeal and replace despite the chances being zero because there is no way House Democrats would agree. Nonetheless, this bill would undo much of the PPACA and block grant Medicaid and set a per-capita cap. The Administration “would give States additional flexibility around benefits and cost-sharing, such as increasing copayments for non-emergency use of the emergency department to encourage appropriate use of healthcare resources, as well as allowing States to consider savings and other assets when determining Medicaid eligibility.” In other words, continuing the same path started under the Section 1115 waiver process that has allowed Kentucky and Arkansas to implement work requirements to their Medicaid programs and other changes that have resulted in people being pushed out of their healthcare coverage. Likewise, the Administration states “The Budget includes bold proposals to help able- bodied adults participating in the Supplemental Nutrition Assistance Program (SNAP) enter the job market and work toward self-sufficiency.”

HUD’s Community Development Block Grant program (CDBG) would be zeroed because it “has not demonstrated sufficient impact.” For FY 2019, Congress ignored a similar request and funded this popular program at $3 billion.

The Administration is proposing to cut the the Department of Education’s Public Service Loan Forgiveness program and “streamline” the income-driven repayment (IDR) (i.e. most likely impose dramatic cuts to eligibility).

However, the U.S.-Mexico border is back, front and center. The Administration asks for $5 billion in the DHS section of the budget request to build a “border wall,” $2.7 billion “for 54,000 detention beds to ensure ICE has the ability to detain criminal aliens and those apprehended at the border—including aliens with meritless asylum claims—so they can be safely removed,” and the creation of a new “Border Security and Immigration Enforcement Fund to provide the additional mandatory funding resources necessary to meet the President’s border security and immigration enforcement goals.” This last item is an obvious attempt to circumvent Congress’ control of funding and programmatic issues through annual funding bills, for with such a mandatory source of funding, the Administration would conceivably have more leeway in getting and using funds. However, I doubt very seriously Congress will agree to this.

In any event, I would recommend skipping much of the prose and heading straight for Page 109 where the tables begin.

Like almost all Presidential budgets, the economic assumptions are rosy (Table S–9). The Administration is projecting that current economic growth will grow a bit in 2019 (from 2.8% to 3.2%) and then dip in FY 2020 to 3.1%. If this comes to be, this would be solid economic growth that would help the government’s finances. We’ll see. Also, the Administration is projecting 2.3% inflation not only for FY 2020 but for the entire ten year budget window. And, the Administration is projecting a $1.101 trillion deficit for FY 2020 and a $1.092 trillion for FY 2019.

In terms of economic assumptions, the Administration is projecting real GDP growth of 3.1% for 2020, no change in the unemployment rate of 3.6%, the interest rate on the 10-year Treasury note will rise to 3.6%, and inflation to rise from 2.1% to 2.3%. Overall, the Trump Administration is projecting a deficit of $1.101 trillion for FY 2020 (or 4.9% of projected GDP).

In this chart (S-8), the Trump Administration shows the extent of the domestic funding cuts:

However, these numbers are not entirely accurate, for as OMB explains in Footnote 1 that some of the agencies funding top-lines are based on the FY 2019 continuing resolution levels because the chart was prepared before enactment of the “ Consolidated Appropriations Act 2019” (P.L. 116-6), the bill that ended the five-week partial government shutdown. Nonetheless, they provide a rough if not close sense of how deep some of the proposed cuts would be:
Agriculture -14.8%
Education -12%
Energy -10.8%
Health and Human Services -11.9%
Housing and Urban Development -16.4%
Interior -10.9%
Labor -9.7%
State and foreign operations -23.3%
Transportation -21.5%

In all, this budget, if enacted, would render major changes to the U.S. with respect to social policy and push the country even further down the path of income inequality. However, Congress will not go along, and most of the budget will be ignored, and the spending caps will be adjusted upwards for both defense and non-defense.

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