The Office of Management and Budget released President Donald Trump’s full budget proposal for fiscal year 2018 Tuesday morning. It fleshed out ideas and priorities mentioned in the so-called “skinny budget” put forth in March and added tinder to the flames of business journalism for weeks to come.
The contents of the budget won’t come as much of a surprise for even the greenest business reporter: As expected, the president called for significant cuts to non-defense discretionary spending, entitlement spending and most federal agencies. It’s all part of a grand shift toward deregulation as a means of stimulating an economy that the budget calls “broken and stagnant,” due to bureaucratic glut and bad trade deals. The cuts also help offset massive tax breaks proposed for upper-income Americans.
Defense discretionary spending will see a nearly $50 billion boost in 2018 if the budget goes through, while the departments of defense and homeland security will see the biggest departmental budget increases in order to carry out the president’s strict immigration and national defense priorities.
The budget is more than 60 pages long, with no small amount of jargon and legalese. We unpacked it into a few bite-sized individual business stories and tips.
Will it pass?
Short answer: No, as Nate Silver bluntly puts it. Presidential budgets are never passed as written; they typically face an array of markups and amendments from both houses of the legislature. Business reporters should remember this when covering the budget. It’s certainly news and it has the president’s fingerprints all over it, but by the time the government is funded for the next year the budget will be markedly different.
The budget makes some pretty lofty estimates for economic development, and predicates an eventual balanced budget on that growth: It supposes that economic growth will sit at 3 percent annually by 2021, a number that far exceeds predictions from the Congressional Budget Office and the Fed. As Silver points out in his story, periods of economic growth of that magnitude are not unheard of but accompany times of increased productivity and a growing labor force. As the president has pointed out in many a speech, we are not in such a time at the moment.
Democrats will bristle at virtually everything in the budget with the notable exception of the allocation of funding for paid parental leave. But few issues will earn their ire more than cuts deriving from the repeal and replacement of the Affordable Care Act, as put into motion by the House-approved American Health Care Act. As the left-leaning Center for Budget and Policy Priorities bemoans, the budget proposal assumes $1.25 trillion in cuts over 10 years if Obamacare goes away. And it makes cuts to Medicaid to the tune of $610 billion over that same period, contrary to Trump’s prior promises to leave the program be.
This will not only prove unpopular with Democrats but also Republicans in moderate districts uneasy about their re-election chances. Plus, it has the potential to alienate the same working class citizens who voted for the president, especially Rust Belt Democrats who crossed the aisle. The Medicaid reforms are part of a broader shift that places the burden of safety net programs on the states: The budget also calls for states to begin paying for SNAP, the Supplemental Nutrition Assistance Program (food stamps). If the budget goes through, states will be responsible for, on average, 25 percent of the program’s funding by 2023.
Defense is in the eye of the beholder
Although the budget’s call for a $52 billion increase to the Defense Department is no small potatoes, defense hawks are unlikely to be placated. Sen. John McCain, R-AZ, one of Trump’s most vocal GOP critics, targeted the president in a Tuesday press release. McCain said the new budget only represents a 3 percent increase over President Barack Obama’s projections for defense spending in FY18, which is not adequate for the military challenges facing the country.
• The budget plays fast and loose with economic consensus, but keep in mind that economists are rarely in agreement about much of anything. Reporters would be wise to seek a variety of economic opinions from across the political spectrum.
• Cuts to entitlement programs and federal regulations make up the bulk of the deficit reduction and are also being leaned on to pay for tax cuts and a “great, great” wall, among other immigration policies. Reporters should focus on the amount of money for which their state may be on the hook.
• Reporters should think of how this will play into the midterm elections. Democrats will likely use the surprise cuts to Medicaid as ammo against weak Republicans, whereas some fiscal archconservatives may feel the budget doesn’t go far enough to dismantle the bureaucratic state.