Photographs by AP/SUSAN WALSH
James Knable helps to unpack copies Monday of the President’s FY19 Budget after it arrived at the House Budget Committee office on Capitol Hill.
Originally published February 13, 2018 at 04:30a.m., updated February 13, 2018 at 10:24a.m.
WASHINGTON -- The White House released a tax and spending plan Monday that would not eliminate the federal budget deficit after 10 years, its first public acknowledgment that large spending increases and the $1.5 trillion tax cut are putting pressure on the government's debt.
The $4.4 trillion proposal sets forth President Donald Trump's priorities as Congress prepares to consider spending bills for the next fiscal year.
In remarks Monday, Trump focused on the spending increases he favors rather than the deficits he and other Republicans have pledged to reduce.
"We're going to have the strongest military we've ever had, by far," Trump said. "In this budget we took care of the military like it's never been taken care of before."
It would continue to markedly increase military spending and set aside money for a wall along the U.S.-Mexico border.
Trump's plan includes a request for $85.5 billion in discretionary funding for veterans' medical care and $13 billion in new spending to tackle opioid abuse through prevention, treatment, recovery support services and mental health programs.
The plan calls for major cuts to Medicare, Medicaid, food stamps and other social programs. But even with these reductions, which add up to more than $3 trillion in cuts over 10 years, the proposal would not bring the budget into balance because of the lost tax revenue and higher spending on other programs.
The 2019 budget was originally designed to double down on last year's proposals to slash foreign aid, the Environmental Protection Agency, home heating assistance and other nondefense programs funded by Congress each year.
It does not yet reflect last week's two-year bipartisan $300 billion pact that wholly rejects Trump's plans to slash domestic agencies.
Mick Mulvaney, Trump's budget director, informed House Speaker Paul Ryan, R-Wis., in a letter that the president is proposing to pour much of the increased domestic spending in that package into defense and fixing "some longtime budget gimmicks" that have added to the nation's deficits.
The White House is proposing $540 billion in nondefense spending for 2019 -- $57 billion below the new spending cap set by Congress.
"In one year of working together, we have laid the foundation for a new era of American greatness," Trump said in the budget message accompanying his spending document. "America is back to winning again. A great spirit of optimism continues to sweep across our nation."
Presidential budgets are often declared dead on arrival in Congress where lawmakers have their own ideas about spending priorities. But the documents do represent the most detailed elaboration of an administration's priorities.
$450B DEFICIT IN '27
The White House projects a large gap between government spending and tax revenue over the next decade, adding at least $7 trillion to the debt over that time. In 2019 and 2020 alone, the government would add a combined $2 trillion in debt under Trump's plan.
Even with upbeat economic forecasts and numerous proposed cuts to social programs, the Trump administration projects that it would run a deficit of $450 billion in 2027.
"Does it balance? No, it doesn't," Mulvaney told reporters Monday. "I probably could have made it balance, but you all would have rightly absolutely excoriated us for using funny numbers because it would have taken funny numbers do to it."
He placed the majority of the blame on Congress, saying lawmakers simply refused to cut spending.
Last year, the White House projected its tax and spending proposals would lead to a budget surplus of $16 billion in 2027, which meant the government would have brought in more money through taxes than it spent on programs, something last accomplished in 2001.
The White House had promised that last year's tax cut plan would pay for itself by generating so much revenue that it would not add to the deficit. This ran in sharp contrast to numerous forecasts that found that it would add $1 trillion to $2 trillion to the debt over 10 years.
Monday's budget proposal paints a much different picture of the tax plan's eventual effect compared to what the Treasury Department and the White House had projected. It forecasts that tax revenue will plummet in the next few years and never recover to the levels forecast before the tax plan was enacted in December.
It projects that tax receipts will be $314 billion lower in 2018 than it forecast last year and almost $400 billion lower in 2019.
The White House even projects that tax receipts will be $200 billion lower in 2027 than forecast last year, though it had promised that the tax plan would fully pay for itself by then.
CUTS TO MEDICARE
The budget and deficit problems actually may be much worse than the White House's budget sets forth. That's because some of the cuts would be difficult to pass through Congress.
For example, the budget would cut $1.7 trillion from social programs over a decade, including $237 billion from Medicare.
Medicare is the federal program that provides health benefits to older Americans, and more than 55 million people used the program last year.
The proposed changes to Medicare include changes to drug pricing. The government would reap $47 billion in savings over a decade from a change to Medicare prescription drug plans that would have seniors progress more slowly through the coverage gap known as the "doughnut hole." Far fewer people would reach the catastrophic phase, where they pay 5 percent of the drug cost -- and where Medicare is on the hook for 80 percent.
That change could increase out-of-pocket costs for some seniors, but others would have a protective effect. The budget also says that the rebates negotiated on drug prices should be provided directly to seniors when they pick up their prescriptions and proposes a limit on the maximum out-of-pocket payments by seniors.
Trump's plan also would make changes to Medicaid, the health program for lower-income Americans that is funded by the federal government and states. It would create a "market-based health-care grant" that could fund programs in addition to the traditional Medicaid program, a change that would lower Medicaid spending by about $250 billion over 10 years.
One program that would face the biggest reduction is the Supplemental Nutrition Assistance Program, also known as food stamps. The White House proposes cutting $214 billion from the program over 10 years. It would do this in part by requiring many beneficiaries to accept food deliveries in addition to financial assistance, a change the White House believes will improve nutrition quality and cut back on costs.
Trump also is proposing work requirements for several federal programs, including housing subsidies, food stamps and Medicaid. Such ideas have backing from powerful figures in Congress including Ryan, who promises action on a "workforce development" agenda this year.
The plan reprises proposals to curb crop insurance costs, cut student loan subsidies and reduce pension benefits for federal workers. They went nowhere last year.
DEMOCRATS CALL IT EXTREME
The budget plan was met coolly by many Republicans.
"Budgets are aspirational documents and seldom have a real impact on spending," said Rep. Mark Meadows, R-N.C., chairman of the conservative Freedom Caucus. "Certainly I applaud the president's willingness to address our military, veterans and many suffering from the opioid abuse epidemic. I am not investing much time critiquing the budget when it has little to do with what Congress actually spends."
Trump's decision to abandon aiming for a balanced budget within 10 years represented a split with congressional allies.
House Budget Committee Chairman Steve Womack, R-Ark., said it would be his panel's intention to write a budget that does balance.
"I don't know that I would characterize it as disappointing," he said of Trump's decision to forgo a balanced budget. "Presidents propose. The president is going to advocate for those things that they believe are most needed in our economy right now, and I am all over that. I think that's wonderful."
But the other side of the equation, Womack said, is "where are we going with deficits and debt, can we justify the expense, and if so how are we going to pay for it on the back end in that 10-year window? And that conversation is just beginning since we just received the budget."
Democrats reacted with hostility, saying it confirmed their long-held belief that Trump would pivot from large tax cuts for corporations to a push to scale back government benefits for low-income Americans.
"He slashes education, environmental protection and Medicare and Medicaid," Senate Minority Leader Charles Schumer, D-N.Y., said on the Senate floor. "While corporations reap billions in tax giveaways, older Americans now have to worry about the Trump administration cutting Medicare and Medicaid. It's in his budget."
He said, "The Trump administration should have no illusions about its budget becoming law. It won't."
"The Trump budget proposal makes clear his desire to enact massive cuts to health care, anti-poverty programs, and investments in economic growth to blunt the deficit-exploding impact of his tax cuts for millionaires and corporations," said Rep. John Yarmuth of Kentucky, the top Democrat on the House Budget Committee. "These cuts to critical federal investments are so extreme they can only reflect a disdain for working families and a total lack of vision for a stronger society."
Yarmuth said that while the deficit and debt are "pretty bewildering" to the average voter, Democrats would be pointing to the GOP's record on those issues heading into the midterms, particularly in relation to last year's tax bill that added $1.5 trillion to the debt.
"I think we will certainly talk about the deficit and the connection to the tax bill. I don't think there's any question about that," Yarmuth said.
"It's an interesting role reversal," he said.
Information for this article was contributed by Damian Paletta, Erica Werner, Heather Long, Carolyn Y. Johnson and Greg Jaffe of The Washington Post; by Andrew Taylor and Martin Crutsinger of The Associated Press; by Julie Hirschfeld Davis of The New York Times; and by Justin Sink, Steven T. Dennis, Zachary Tracer, Anna Edney, Alan Levin and Tony Capaccio of Bloomberg News.
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