Spending Cuts, Flush Economy Path to Trump Budget Balance

By Jonathan Nicholson

The Trump administration’s first full budget aims to get to balance by 2027 through a mix of cuts in a wide swath of federal programs as well as an assumption of faster economic growth.

Mick Mulvaney, director of the White House’s Office of Management and Budget, told reporters May 22 the fiscal 2018 budget was put together with an emphasis on the impact of government on taxpayers. He called it “the taxpayer first budget.”

In the plan, the White House aims to show in 2027 a $16 billion budget surplus—the first since 2001. For the full 2018-2027 budget window, though, the cumulative deficit would be $3.150 trillion.

In comparison, the nonpartisan Congressional Budget Office in January projected much wider deficits if current law were simply left in place: $1.408 trillion in 2027 and a 10-year deficit of $9.426 trillion.

$2 Trillion From Economy

According to budget tables released by the White House, the Trump budget has a starting point close to the CBO’s—an $8.775 trillion in projected deficits over 10 years in its “pre-policy baseline.”

In the budget, the administration says its policy proposals will save about $3.563 trillion over 10 years, with slightly over half coming from major initiatives like repealing the Affordable Care Act, changing Medicaid and the Children’s Health Insurance Program and changes in welfare programs. An additional $1.404 trillion would come from recurring annual 2 percent cuts in non-defense programs throughout the budget window.

In addition to the policy proposals and lower interest payments from those savings, the budget also assumes $2.062 trillion in deficit reduction from faster economic growth over 10 years.

That extra boost to federal tax coffers and lower social program payments is enough to put the budget in the black in 2027, with a projected deficit reduction impact of $196 billion in that year alone, far larger than the projected overall surplus of $16 billion.

Not ‘Fanciful’

Mulvaney rebutted criticisms the budget’s economic assumptions were too rosy and its social program cuts were too deep.

The budget projects the U.S. economy to grow at a 2.3 percent rate, on a fourth quarter over fourth quarter basis, in 2017, rising to 2.5 percent in 2018. In 2019 and the rest of the budget window after, economic growth is seen at a steady 3.0 percent, a trend growth rate most mainstream economists say is unlikely due to an aging and less productive work force.

“That assumes a pessimism about America, about the economy, about its people, about its culture that we’re simply refusing to accept. We believe that we can get to 3 percent growth. And by the way, we do not believe that is something fanciful,” Mulvaney said. “Everything is keyed to getting us back to 3 percent.”

Mulvaney said the budget’s initiatives on parental leave and work requirements for federal food aid were examples of policies meant to bring more workers into the labor force.

“We need everybody pulling in the same direction,” he said.

The proposed work requirement would apply for food aid recipients who are able-bodied and have no dependent children, Mulvaney said.

“We believe in the social safety net. We absolutely do. I know that folks want to say the narrative is that Republicans don’t, " he said. “I believe in the social safety net. I also think it helps us get to that 3 percent growth because having that social safety net does provide people with the confidence of knowing they can take a gamble and fail and they won’t be completely wiped out.”

To contact the reporter on this story: Jonathan Nicholson in Washington at jnicholson@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

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