Does Trump have a fiscal math problem?
The spending plan Trump aides described this week will never pass Congress, not even one where both chambers are controlled by Republicans, says the Tax Policy Center.
The spending plan Trump aides described this week will never pass Congress, not even one where both chambers are controlled by Republicans, says the Tax Policy Center.
This week, the Trump Administration said it would ask Congress for big increases in defense spending which it would finance by slashing some domestic programs. While we don鈥檛 know what spending cuts the president will propose鈥攁nd may not know for weeks or months鈥攚e can be sure of something else: The spending plan Trump aides described this week聽will never pass Congress, not even one where both chambers are controlled by Republicans.
The reason: By imposing spending cuts on only about one-seventh the federal budget, he would effectively dismantle programs, many of which have strong support in Congress including among Republicans. At the same time, by protecting entitlement programs such as Medicare and Social Security, he鈥檒l antagonize conservatives.
The White House鈥檚 fiscal signals have been muddled and even contradictory. Early in the week, Budget Director Mick Mulvaney聽said聽Trump would boost defense spending $54 billion and pay for it by reducing a slice of domestic spending by the same amount. Even those numbers are a bit uncertain. Defense experts say Trump would boost Pentagon spending by only about $20 billion, or 3 percent of the defense budget. Then, yesterday, Trump聽suggested聽that he may not need to cut programs at all and instead could finance new defense spending with a burst of economic growth.
Without more information, it is impossible to know exactly how much Trump would cut or where, but let鈥檚 take him at his word and assume he means it when he ways he鈥檇 slash those domestic programs by $54 billion in one year.
Here is the math that will eventually confound the president:
Trump is not talking about cutting all non-defense spending. He says he鈥檇 exclude Social Security and Medicare (and possibly Medicaid). He also says he鈥檒l boost spending for homeland security, a border wall, infrastructure, and other programs. So what鈥檚 left?
Take a look at this table:
The piece of the budget Trump would target, known inside the Beltway as non-defense discretionary spending, is the smallest chunk of non-interest federal spending鈥攁bout $561 billion or 14 percent of all spending . What鈥檚 in this pot? Most everything people think of as government services: everything from federal highways, air traffic control, the national parks, the National Institutes of Health, support for communities recovering from fires and floods, the Department of Homeland Security, the federal justice system, agriculture, the Centers for Disease Control, 聽and Meals on Wheels. It also includes foreign aid. 聽
Carve out the programs Trump says he鈥檒l protect or expand and he鈥檚 implying a cut in the remaining programs of more than 10 percent. 聽Ten percent may not sound like much, but it is a huge amount of money for programs whose budgets have effectively been frozen for years. Worse, population growth and inflation inevitably eat into those resources. 聽Cuts of that size would make it tough for those programs to operate effectively.
Then there is Trump鈥檚 other budget problem. If Congress trims these programs to pay for increases in defense spending, those dollars will no longer be available to fund his proposed tax cuts. It appears highly unlikely that his oft-promised tax plan will pay for itself. TPC estimates that his most recent plan would increase the debt by $7 trillion over 10 years, including its effects on the overall economy (dynamic scoring) and added interest costs. 聽While the president provided no new details in his speech to Congress last night, he seemed prepared to charge ahead on those tax cuts: 鈥淚t will be a big, big cut,鈥 for businesses and 鈥渕assive tax relief for the middle class.鈥
Trouble is, Trump could completely eliminate all programs in the non-defense pot of discretionary spending and he鈥檇 still fall hundreds of billions of dollars short of paying for all the tax cuts he promised in the campaign.
The Administration is not likely to provide any real details for months. The White House says it will release a budget summary in mid-March and a full budget sometime in May. But Trump鈥檚 plan is already running into potholes on Capitol Hill.
Some Republicans like the idea of deep spending cuts, but want to include programs such as Medicare and Social Security. Others worry about the effects of domestic spending reductions on their constituents or the effects of cuts in foreign aid on international relations. And Democrats are likely to be united in opposition to these proposals. 聽No matter what cuts Trump suggests, when it comes to specific dollars for specific programs, Congress will have the last word.
Trump will have little trouble convincing Congress to increase military spending. But he鈥檒l have less success selling the kind of narrow but deep spending cuts he is signaling. That means more pressure on the deficit, especially in future years. And that, in turn, may make enacting a big tax cut even more challenging. 聽聽聽
This story originally appeared on TaxVox.