Politics & Policy

Sound Priorities, Unsound Budget

Copies of the Trump administration 2018 federal budget on Capitol Hill. (Reuters photo: Kevin Lamarque)

Inasmuch as it stands approximately zero chance of ever becoming law, President Trump’s budget proposal demands that we enumerate the angels dancing on the head of a pin. But there is good dance criticism and bad dance criticism.

Something to keep in mind when considering such budget proposals is that a handful of programs account for almost the entirety of federal spending: Social Security, Medicare, Medicaid, and other health-care benefits, national defense, and interest on the debt. Social Security and medical benefits together account for more than half of all federal spending, while defense-related spending accounts for another fifth. The “everything else” category — “non-defense discretionary spending” — amounts to just under 20 percent of the budget.

What follows from this is fairly straightforward: If your budget priorities include an increase in defense spending and avoiding cuts to Social Security and Medicare — and these are President Trump’s priorities — then any effort to locate savings in the budget will put tremendous pressure on non-defense discretionary spending. Add in President Trump’s promise to enact “one of the biggest tax cuts in American history” and that pressure gets very intense indeed. Trump’s budget is ill-advised in many of its particulars and incompetent in others, but as a statement of priorities, it is very much what one would expect from a conventional Republican president — perhaps too much so.

Many of the critics have fixed upon the wrong parts of Trump’s proposal: In spite of hyperventilating claims about “slashing” government spending (Reuters) or taking an “ax” to the social safety net (CNN), what’s actually proposed on those fronts is both modest and sensible: a small reduction (amounting to less than 1 percent) in Social Security disability spending and a small reduction in Medicaid spending. We are habitually wary of politicians who promise to balance the budget by eliminating “waste, fraud, and abuse,” in the inevitable formulation, but both the disability program and Medicaid are infamous pits of fraud. The federal government makes about $140 billion in improper payments annually, a shocking number that is driven largely by Medicaid. One in ten Medicaid dollars is improperly spent. There is room for savings there. In fact, those improper payments alone outstrip the $100 billion a year in total safety-net spending reductions the Trump budget proposes.

The proposed benefit cuts are not simple cuts but reductions in spending implemented through tightening the requirements for certain programs, for instance by enacting and enforcing work requirements under SNAP. Many of those requirements already exist in current law but are neutered by waivers.

These are sensible reforms, and they deserve to be enacted — even expanded upon.

Less sensible is the Trump administration’s plan to create an extraordinarily expensive — $25 billion a year — new federal entitlement program: paid family leave. This is a pet project of the president’s daughter Ivanka, and congressional Republicans should reject it out-of-hand. A one-size-fits-all leave program imposed by Washington on every business sector is a plan for disaster, an exercise in sentimentality that almost certainly would prove more expensive than its already large cost estimate. We need to see less of Washington’s heavy hand in the boardroom, not more of it.

And the president’s accounting for his tax cuts is optimistic, to put it mildly. He proposes a $2 trillion tax cut and argues that the growth effects from such a cut would not only offset all revenue losses but would produce additional revenue sufficient to balance the budget in ten years. Growth effects from tax cuts are a real phenomenon, but a growth effect amounting to 100 percent of revenue forgone is a unicorn, and one amounting to 200 percent of revenue lost is a herd of them. If the Trump team is expecting those kinds of returns, they are dreaming; if they have simply double-counted the expected revenue growth, they are incompetent. Either way, this needs revisiting.

Increasing defense spending, paring back the least effective parts of the welfare state, and reforming the tax code all are worthwhile goals, and we hope Congress will keep them in mind once it tears up the Trump budget and gets to work on the real one.


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