Sat | Oct 21, 2017

Trump budget: More for the military, less for the poor

Published:Wednesday | May 24, 2017 | 12:00 AM

United States President Donald Trump on Tuesday sent Congress a US$4.1 trillion federal spending plan that promises faster economic growth and steep cuts to programmes for the poor in a bid to balance the government's books over the next decade.

The proposed 2018 budget immediately came under attack by Democrats, and even some GOP allies deemed it a non-starter. The proposal is laced with US$3.6 trillion in cuts to domestic agencies, food stamps, Medicaid, highway funding, crop insurance, and medical research, among others.

At the same time, the blueprint boosts spending on the military by tens of billions and calls for US$1.6 billion for a border wall with Mexico that Trump repeatedly promised voters the US neighbour would finance. Mexico emphatically rejects that notion.

Budget experts, Democrats and Republicans challenged the economic assumptions of the White House and Budget Director Mick Mulvaney.

During the campaign, Trump attacked the weak economic growth of the Barack Obama years and pledged that his economic programme would boost growth from the lacklustre 2 per cent rates seen since the recovery began in mid-2009.

Trump's new budget is based on sustained growth above 3 per cent, sharply higher than the expectations of most private economists. Without more than US$2 trillion in such "economic feedback" over the coming decade, the budget would never reach balance and would run a deficit of almost US$500 billion.

"Three per cent, I'm not seeing how you get there mathematically," said Rep Mark Sanford, R-SC. "I think realism in the way we forecast numbers is part and parcel to a constructive budget process."

STREAMLINED GOVERNMENT

The proposal projects that this year's federal deficit would rise to US$603 billion, up from the actual deficit of US$585 billion last year. But the document says if Trump's initiatives are adopted, the deficit would start declining and actually reach a small surplus of US$16 billion in 2027.

However, that goal depends not only on the growth projections that most economists view as overly optimistic but also a variety of accounting gimmicks, including an almost US$600 billion peace dividend from winding down overseas military operations.

The government hasn't run a surplus since 2001, and deficits spiked during former President Barack Obama's first term in the aftermath of the Great Recession.

"Through streamlined government, we will drive an economic boom that raises incomes and expands job opportunities for all Americans," Trump said in his budget message. His budget is titled The New Foundation for American Greatness.

Democrats had an opposite interpretation.

"In the America of President Trump's budget, children, working families, seniors and people with disabilities will be 'fined,' while the wealthiest Americans will get a 'bonus.' What's so 'great' about that America?" asked Senator Dick Durbin of Illinois.

Food stamp cuts would drive millions from the programme, while a wave of Medicaid cuts could deny nursing home care to millions of elderly poor people.

"Isn't it reasonable to at least ask the question, 'Are there people on that programme who shouldn't be on there?'" Mulvaney asked.

The budget does feature a handful of domestic initiatives, including a six-week paid parental leave programme championed by Trump's daughter, Ivanka. Some US$200 billion in federal infrastructure investments are promised to leverage another US$800 billion in private investment.

Trump would keep campaign pledges to leave core Medicare and Social Security benefits for the elderly alone, but that would translate into even deeper cuts in programmes for the poor such as Medicaid and food stamps.

Medicaid, the government insurance programme for the poor and many disabled Americans, would be cut by more than US$600 billion over 10 years by capping payments to states and giving governors more flexibility to manage their rosters of Medicaid recipients. Those cuts go on top of the repeal of Obamacare's expansion of the programme to 14 million people and amount to, by decade's end, an almost 25 per cent cut from present projections.

Likewise, a 10-year, US-$191 billion reduction in food stamps almost 30 per cent far exceeds prior proposals by Capitol Hill Republicans. The food stamp programme serves about 42 million people.

"These cuts that are being proposed are draconian," said veteran GOP Rep Harold Rogers, who represents a poor district in eastern Kentucky. "They're not mere shavings, they're deep, deep cuts."

Other cuts in Trump's budget include reductions in pension benefits for federal workers, in part by requiring employees to make higher contributions. In agriculture, the proposed budget would limit subsidies to farmers, including for purchasing crop insurance, a move already attacked by farm state lawmakers.

On taxes, Trump promises an overhaul that would cut tax rates but rely on economic growth and erasing tax breaks to avoid adding to the deficit. There would be three tax brackets 10 per cent, 25 per cent and 35 per cent instead of the current seven, and there's a promise to lower the corporate tax rate to 15 per cent.

But the budget has virtually no detail to prove that it would deliver on Trump's promise for "massive" tax cuts.