A common refrain about the President’s annual budget is that it is “dead on arrival” in Congress. This is often considered a pejorative dismissal of the document as an unrealistic wish list of new initiatives, program reforms, and spending changes. The fact that any administration’s ideas on how to spend tax dollars is dead on arrival could be more of a statement about how a stagnant Congress is captured by special interests and the beneficiaries of current programs than it is about the lack of seriousness of a President’s Budget. Either way, in practice, the President’s budget is an unconstrained vision document that doubles as the Administration’s priorities and proposals for reform. It’s a look into what it would be like if the President were king.
In an America without Congress – and President Trump were king – our budget would still not balance. It would save $4.4 trillion over the next 10 years – but allow another $7 trillion in debt to accrue and would maintain $350+ billion deficits throughout. While some may see this as ceding to fiscal reality – to the coming generation – this vision falls far short from what we need.
To the proposal’s credit, the budget identifies $48.4 billion worth of specific savings in discretionary programs ($25.8 billion in program eliminations and $22.6 billion in reductions). The President’s budget also includes $237 billion in savings to Medicare – a foray into the expensive entitlement programs that the President has to-this-date pledged not to touch. Although $237 billion sounds like a lot – it is only 2.5 percent of the $10.5 trillion that the program is projected to spend over the next 10 years. And therein lies the problem.
According to the Congressional Budget Office’s projections, 75 percent ($39 trillion of the $53 trillion) of the federal funds that will be spent over the next 10 years will be for mandatory programs and interest. A significant majority of mandatory program spending are Social Security, Medicare, and Medicaid. The other $14 trillion (which could go up to $15 or $16 trillion based on last week’s budget deal) is in discretionary spending, and half of that is defense. So even if you aggressively cut the non-defense discretionary portion of the budget significantly – such as the President’s Budget proposal to cut spending in this area by 2 percent annually after 2020 – the fiscal picture is still broken.
Even if Trump were king – he could not dictate the economic growth that accounts for more than half of the savings in his budget. According to the Committee for a Responsible Federal Budget – policy proposals only account for $2.1 trillion of the budget’s $4.4 trillion in deficit reduction claims. The rest comes from rosy, unrealistic economic growth forecasts and baseline adjustments that overestimate revenues and underestimate spending. In sum, ten straight years of booming economic growth would be welcome, but should not be relied on as a fiscal policy.
In the President’s Budget, there is a section entitled “a commitment to a better future.” It says:
“When this President was elected, bloated budgets and stagnant economic growth painted a grim picture of a bleak future. If the Federal deficit continued to rise without restraint, the future would indeed be desolate and prompt future calls for tax increases. The Budget shines a light through that darkness. The Budget is a plan that secures generations of Americans through efficient, effective, and accountable Government.”
We do not need a king to make the changes necessary to live up to this statement. But we do need a plan that includes major entitlement reform and realistic economic growth estimates. Without it, the next generation’s prospects for a strong economy will be dead on arrival.