As US deficit soars to $1 trillion, Trump offers new budget

President Donald Trump is offering a $4.8 trillion budget that increases spending for defense and NASA, but won't cut Social Security and Medicare.

First Look

Confronted with the threat of trillion-dollar-plus deficits for more than a decade, President Donald Trump is offering a $4.8 trillion budget plan for the upcoming fiscal year that revisits spending cuts previously rejected by Congress while leaving Social Security and Medicare benefits untouched.

Mr. Trump’s fiscal 2021 budget plan, to be released Monday, isn’t likely to generate a serious Washington dialogue about what to do about entrenched fiscal problems that have deficits surging despite a healthy economy. Most expect such discussions to be delayed until after the November election.

The new budget, according to senior administration aides and a copy of summary tables, sees a $1.08 trillion budget deficit for the ongoing budget year and a $966 billion deficit gap in the 2021 fiscal year starting Oct. 1.

The budget's most significant policy prescriptions – an immediate 5% cut to non-defense agency budgets passed by Congress and $700 billion in cuts to Medicaid over a decade – are nonstarters on Capitol Hill. But the Trump budget is a blueprint written as if Mr. Trump could enact it without congressional approval. It relies on rosy economic projections and unlikely claims of future cuts to domestic programs to show that it is possible to bend the deficit curve in the right direction.

The budget would reduce the deficit to $261 billion within a decade if enacted in its entirety and promises balance after 15 years. But Mr. Trump's budget blueprint also assumes 2.8% economic growth this year and growth averaging 3% over the long term.

The reality is that no one – Mr. Trump, the Democratic-controlled House, or the GOP-held Senate – has any interest in tackling a chronic budget gap that forces the government to borrow 22 cents of every dollar it spends.

Mr. Trump’s reelection campaign, meanwhile, is focused on the economy and the historically low jobless rate while ignoring the government’s budget.

On Capitol Hill, Democrats controlling the House have seen their number of deficit-conscious "Blue Dogs" shrink while the roster of lawmakers favoring costly "Medicare for All" and "Green New Deal" proposals has swelled. Tea party Republicans have abandoned the cause that defined, at least in part, their successful takeover of the House a decade ago.

Mr. Trump has succumbed to the Washington temptation to deliver spending increases and tax cuts first and then deal – or not – with their impact on the deficit. Mr. Trump and key administration figures such as Treasury Secretary Steven Mnuchin had promised that Mr. Trump’s signature cuts to corporate and individual tax rates would pay for themselves; instead the deficit spiked by more than $300 billion over 2017 to 2019, falling just short of $1 trillion.

Mr. Trump has also signed two broader budget deals worked out by Democrats and Republicans to get rid of spending cuts left over from a failed 2011 budget accord. The result has been eye-popping spending levels for defense – to about $750 billion this year – and comparable gains for domestic programs favored by Democrats.

Mr. Trump's budget violates last year's spending accord with an immediate $37 billion cut to non-defense programs appropriated by Congress each year, including a $2.4 billion, 27% cut to the Environmental Protection Agency, and a 13% cut to the Department of Transportation. The Department of Veterans Affairs would win a 13% budget boost.

The White House hasn’t done much to draw attention to this year’s budget release, though Mr. Trump has revealed initiatives of interest to key 2020 battleground states, such as an increase to $250 million to restore Florida’s Everglades and a move to finally abandon a multibillion-dollar, never used, nuclear waste dump that’s political poison in Nevada. The White House also leaked word of a $25 billion proposal for "Revitalizing Rural America" with grants for broadband Internet access and other traditional infrastructure projects such as roads and bridges.

The Trump budget also promises a $3 billion increase – to $25 billion – for NASA in hopes of returning astronauts to the moon and on to Mars. It contains a beefed-up, 10-year, $1 trillion infrastructure proposal, a modest parental leave plan, and a 10-year, $130 billion set-aside for tackling the high cost of prescription drugs this year.

Mr. Trump's U.S.-Mexico border wall would receive a $2 billion appropriation, more than provided by Congress but less than the $8 billion requested last year. Mr. Trump has enough wall money on hand to build 1,000 miles of wall, most of it obtained by exploiting his budget transfer powers.

Mr. Trump took to Twitter on Saturday to promise voters that his budget "will not be touching your Social Security or Medicare" in keeping with his longstanding 2016 campaign promise.

Mr. Trump had made a bit of a stir last month at a meeting of global economic elites in Davos, Switzerland, when he told a CNBC interviewer that "at some point" he would consider curbs to popular benefit programs like Medicare and Social Security.

"At the right time, we will take a look at that," Trump said. "You know, that’s actually the easiest of all things." After Saturday’s tweet, an administration official said, "Every current beneficiary will keep their benefits as the President has always promised."

Mr. Trump has proposed modest adjustments to eligibility for Social Security disability benefits and he’s proposed cuts to Medicare providers such as hospitals, but the real cost driver of Medicare and Social Security is the ongoing retirement surge of the baby boom-generation and health care costs that continue to outpace inflation.

With Medicare and Social Security largely off the table, Mr. Trump has instead focused on Medicaid, which provides care to more than 70 million poor and disabled people. President Barack Obama successfully expanded Medicaid when passing the Affordable Care Act a decade ago, but Mr. Trump has endorsed GOP plans – they failed spectacularly in the Senate two years ago – to dramatically curb the program.

Mr. Trump's latest Medicaid proposal would allow states that want more flexibility in Medicaid to accept their federal share as a lump sum; for states staying in traditional Medicaid, a 3% cap on cost growth would apply. Mr. Trump would also revive a plan, rejected by lawmakers in the past, to cut food stamp costs by providing much of the benefit as food shipments instead of cash.

"This destructive and irrational President is giving us a destructive and irrational budget," said House Budget Committee Chairman John Yarmuth, D-Ky. "The budget reportedly includes destructive changes to Medicaid, SNAP, Social Security, and other assistance programs that help Americans make ends meet – all while extending his tax cuts for millionaires and wealthy corporations."

This story was reported by The Associated Press.