President Trump's FY2020 Budget Proposal: Setting Election Priorities

This is the first in a series of reports on President Trump’s proposed fiscal year 2020 budget. The summary budget documents released on March 11 will be followed by more detailed information during the week of March 18. Over the next several days, CRD Associates will publish in-depth analyses of the president’s budget request.

 

President Trump’s 2020 Budget Proposal: Setting Election Priorities

-By Dom Ruscio, Partner

 The budget blueprint President Trump unveiled on March 11 sent several messages, not the least of which is how he plans to frame the next election campaign.

 To begin with, his $4.7 trillion spending proposal assumes a far more optimistic economic outlook than experts say is warranted—considerably higher than what is forecast by the Congressional Budget Office and the Federal Reserve. The president’s assumptions for economic growth are roughly the same as they were last year, despite signs that the economy may be weakening and economists’ warnings of a possible recession on the horizon.

 The budget proposal calls for a nearly five percent increase in defense spending and another $8.6 billion for the construction of a border wall. Those add-ons would be offset by massive savings over the next 10 years by cutting nondefense discretionary programs, curbing health care costs and imposing tougher work requirements on safety net programs.

Nondefense spending in the cross-hairs

Under the president’s plan, most nondefense discretionary programs would be cut by an average of 9 percent in fiscal year 2020, or 11 percent when adjusted for inflation. And since certain agencies, like Homeland Security and Veterans Affairs, are slated for increases (+7.4 percent and +7.5 percent, respectively) the cuts are much deeper for other agencies.

 The president proposes to cut the Department of Health and Human Services by 12 percent, even as he calls for $291 million new funding to end HIV transmission and more money to care for unaccompanied migrant children. The National Institutes of Health would be cut by $5.4 billion, the Centers for Disease Control and Prevention would be reduced $750 million, AHRQ would be cut $200 million and HRSA would be cut $1 billion. 

 In addition, safety net programs would be reduced $1.9 trillion over the next decade. Medicare would be cut $846 billion and Social Security programs would be reduced $26 billion, including $10 billion from the Social Security Disability program. The primary source of Medicaid savings, $1.4 trillion, would come from replacing the federal contribution to states with block grant programs, while another $327 billion would come from new work requirements on working-age adults.

 Among the few HHS agencies to get an increase under the president budget the FDA would receive a boost of $643 million, including $55 million to curb the opioid epidemic, while the Unaccompanied Alien Children Contingency Fund would receive $480 million.

 The Education Department would be cut by $8.5 billion, or 12 percent, under the president’s proposal, primarily by eliminating after-school and teacher training programs. But the budget would also create a $5 billion program to help children attend private schools.

 

Next steps

Although most lawmakers will dismiss the president’s budget request as dead-on-arrival, it signals the start of what promises to be another contentious budget and appropriations process.

 First and foremost, lawmakers will have to figure out a plan to ease spending caps that snap back into place in fiscal year 2020, and threaten across-the-board spending cuts—a plan that both sides call a win.

 Second, later this year Congress will have to vote to raise the debt ceiling, which is estimated to be just north of $22 trillion. For the time being, the Treasury Department can use extraordinary measures to avoid hitting the debt ceiling before late summer or early fall. But that vote could become the go-to leverage point for raising the spending caps as well as renewing the expired tax extenders.

 Watch this space!