HomeFT SelectTrump’s ‘America First’ budget to propose deep cuts

Trump’s ‘America First’ budget to propose deep cuts

The White House will propose large spending cuts on Thursday for the state department, public broadcasting and environmental programmes as part of its preliminary budget for the 2018 fiscal year.

Administration aides call it an “America First” budget — with greater spending on defence, law enforcement and veteran affairs, as well as new education programmes that emphasise school choice. The last are a pet project of Betsy DeVos, Mr Trump’s education secretary. 

The so-called “skinny” budget provides a road map for the administration’s biggest priorities, and it comes weeks before the White House releases its complete 2018 spending plan. Here is what to expect. 

What broad changes is the president proposing? 

The White House says the new budget is based on President Trump’s campaign promises, including building up the US military while trimming the state department and foreign aid programmes. 

Military spending is to rise by $54bn while the state department is expected to have its budget reduced by more than 25 per cent, with big cuts to programmes such as the US Agency for International Development and the US budget for the United Nations. The White House originally planned to cut the state department’s budget by as much as 37 per cent, but that has since been reduced, reportedly because of opposition by Rex Tillerson, secretary of state.

Other funds will go to law enforcement and border protection, while some money will be allocated to begin construction on the president’s proposed wall along the US-Mexico border. On the education side, the president has said he wants to expand access to charter schools. 

Will total spending go up or down? 

Mr Trump’s attack on discretionary spending is expected to leave the biggest growth areas in the federal budget unscathed. According to the most recent Congressional Budget Office projections, overall spending is projected to rise by $2.6tn from 2017 to 2027, with no less than 70 per cent of the growth fuelled by social security, Medicare and interest.

That reflects the demands of an ageing population and is a problem that Mick Mulvaney, director of the Office of Management and Budget — among others — has previously said needs to be addressed.

The president, however, pledged to protect entitlements such as Medicare and social security during the campaign as he sought to bolster his share of older voters. That message has been confirmed by Steven Mnuchin, Treasury secretary, who has said the president’s budget will not touch entitlements. 

Mr Trump has also promised to lift defence spending — which already is set to account for 6 per cent of spending growth over the same period, according to the CBO. Growth in other discretionary areas — where the White House has signalled that the axe will fall — is set to be just 4 per cent.

Will fiscal conservatives like the proposal?

In protecting entitlements and defence while cutting taxes and lifting infrastructure spending, Mr Trump is likely to run up against the Republican party’s fiscal conservatives who worry about the sustainability of the longer-term trajectory of public finances.

One way for the president to claim he is squaring the circle is by predicting higher growth rates as a result of his proposed regulatory and tax reforms. Mr Mnuchin said last month that the administration thinks its reforms will propel a surge in economic growth to 3 per cent or higher.

Fiscal hawks will attack assumptions that growth of that level or higher can be sustained. The Committee for a Responsible Federal Budget, a non-partisan think-tank, has said they should be seen as “aspirational” and not have a place in any official government projection. The CBO’s estimate for average real growth over the next 10 years is just 1.9 per cent.

How will cuts affect Mr Trump’s foreign policy?  

At a confirmation hearing this week, Mr Trump’s nominee for US trade representative faced pointed questions from Democrats, including over how he could deliver on the president’s much-touted promises to get tough with countries such as China on trade with fewer resources.

“Isn’t cutting enforcement resources an invitation to foreigners to cheat our workers and businesses?” asked Senator Ron Wyden, the top Democrat on the finance committee. “It seems like a simple question.”

“It seems kind of like a trap question,” Robert Lighthizer, a veteran of the Reagan administration, shot back. “Senator, we are going to do the best we can with what we have.”

Others are taking a more critical stance against the proposed budget. 

Mitch McConnell, Senate majority leader, has already said he would oppose a budget that proposed drastic cuts for the state department, while more than 120 retired generals, including David Petraeus, former CIA director, and James Stavridis, former Nato supreme allied commander, have written a letter to congressional leaders stressing the importance of diplomacy and development in US policy.

Via FT

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