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Trump’s $3.6 trillion budget cuts hit his supporters hard

UPDATED: Tue., May 23, 2017

Budget Director Mick Mulvaney holds up a copy of President Donald Trump’s proposed fiscal 2018 federal budget as he speaks to members of the media in the Press Briefing Room of the White House in Washington, Tuesday, May 23, 2017. (Andrew Harnik / Associated Press)
Budget Director Mick Mulvaney holds up a copy of President Donald Trump’s proposed fiscal 2018 federal budget as he speaks to members of the media in the Press Briefing Room of the White House in Washington, Tuesday, May 23, 2017. (Andrew Harnik / Associated Press)
By Justin Sink and Erik Wasson Bloomberg

President Donald Trump’s first full budget would dramatically reduce the U.S. government’s role in society, hitting hard many of the rural, working-poor supporters who propelled him into office as he cuts through the safety net for the poor and disabled, hitting farming communities and inner cities alike.

And the urban minority voters whom Trump asked in his campaign “What do you have to lose?” by supporting him got their answer in the $3.6 trillion in spending reductions he’s requesting. They, along with residents of rural areas, would feel the bite of steep reductions in food stamps, Medicaid health insurance payments, low-income housing assistance and block grants that fund Meals on Wheels for the elderly.

For those reasons, among others, Trump’s fiscal 2018 budget, released Tuesday, is finding little support in Congress, even among Republican lawmakers from districts and states that gave Trump wide margins in the November election.

The administration is undeterred, calling for a rethinking of government to place greater weight on the interests of the people who pay taxes rather than those who turn to it for help.

“It’s a taxpayer-first budget,” Mick Mulvaney, the White House budget director, said, echoing Trump’s message to lawmakers that introduced the full budget document.

“We are no longer going to measure compassion by the number of programs and the amount spent on those programs,” Mulvaney said, arguing that the policies will help aid recipients rejoin the workforce. “We need everybody to pull in the same direction.”

But Congress has its own plans and, as Senate Republican leader Mitch McConnell of Kentucky said in an interview last week with Bloomberg News, Trump’s priorities “aren’t necessarily ours.”

“We know the president’s budget is not going to be passed as proposed,” Sen. John Cornyn, R-Texas, said Tuesday. Even so, Senate Republicans are working to implement some of Trump’s proposed Medicaid cuts as part of an Obamacare repeal bill and plan to take up his proposed tax rate cuts later this year.

House Speaker Paul Ryan, R-Wis., said Trump’s budget, like those of his predecessors, will get a heavy reworking in Congress. But he sought to highlight areas where the White House and congressional Republicans share similar goals.

“Here’s what I’m happy about: We finally have a president who’s willing to actually even balance the budget,” Ryan told reporters. “And we will have a great debate about the details on how to achieve those goals.”

Trump’s proposal claims to balance the budget within a decade. But it relies on a tax plan for which the administration has provided precious little detail and makes heavy use of accounting gimmicks.

The president’s proposal would fulfill his campaign promise of leaving Social Security retirement benefits and Medicare untouched while increasing national security spending. He’s also proposing deep cuts to foreign aid and tighter eligibility for tax credits that benefit the working poor.

Cuts to agricultural programs will be felt in Trump country. Eight of the 10 states that received the most federal money in farm subsides voted for Trump, according to a state ranking compiled by the Environmental Working Group. Even in Illinois and Minnesota, the two states that voted for Democrat Hillary Clinton, rural areas supported the Republican.

The plan calls for some new domestic spending, including $25 billion over 10 years for nationwide paid parental leave – a cause championed by first daughter Ivanka Trump – and an expansion of the Pell Grant program for low-income students.

The sheer ambition of the president’s plan, which would cut domestic agencies by 10 percent in 2018 and by 40 percent in 2027, make the budget even less likely to gain traction on Capitol Hill, where lawmakers regularly flout the annual blueprint offered by the executive branch. But lawmakers are also likely to view some of the administration’s accounting gimmicks with extreme skepticism.

The budget predicts a sweeping tax overhaul package that would strengthen economic growth while providing few details of how the tax code would change. The one thing the administration has said is people and businesses will pay less; the budget asserts the amount of revenue collected won’t drop.

Neither of the White House’s assertions – that Trump’s tax plan would be both revenue-neutral and fuel budget coffers by $2 trillion to $2.6 trillion through economic growth – is realistic, said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget.

She called the administration’s projections of 3 percent annual growth “really not possible – they have impossible assumptions of no changes in revenue and tax cuts.” She added that to see 3 or 4 percent growth “is nearly unprecedented. You’d need productivity growth at a level you’ve never seen.”

The scant detail in Trump’s tax proposal was likely to hinder tax reform, she said. “They rolled out all the goodies but none of the offsets that would be necessary,” MacGuineas said. “I’m not a fan of surprises, and you have to set realistic expectations, because there are real trade-offs and choices.”

The independent Tax Policy Center estimated that Trump’s campaign tax plan would add $7.2 trillion to the deficit. Economic growth spurred by Trump’s tax and regulation policy would add more than $2 trillion in tax revenue, according to the budget documents.

The budget also makes use of several other classic accounting gimmicks. It assumes that the wars in Afghanistan and the Middle East will cause future Congresses to allocate $593 billion in extra war funding that won’t be needed and then claims to save that amount by not spending it.

The Trump budget also assumes a $35 billion savings from changes to financial services industry regulations and a repeal of the Dodd-Frank law’s orderly liquidation authority, under which financial regulators are empowered to untangle and wind down the biggest banks in a crisis. The nonpartisan Congressional Budget Office projected savings of $14.5 billion over a decade from eliminating the authority.

The proposal seeks to boost government revenues by allowing drilling in the Arctic National Wildlife Refuge, ending the practice of sharing oil royalties with states along the Gulf of Mexico and selling off government-owned electricity transmission lines in the West. Like much of the budget, those moves are likely to face opposition on Capitol Hill.

Trump has promised a wall on the southern U.S. border that Mexico will eventually pay for, and the budget includes $2.6 billion in 2018 – $1.6 billion for “new and replacement border wall” in certain locations and about $1 billion for other items including aircraft, equipment and surveillance technology to deter illegal activity. Trump estimates the wall will cost $8 billion to $12 billion, but most experts say it will likely be more expensive.

While Trump is proposing to increase the defense budget, the push for more high-priced weapons will wait another year.

The Trump budget requests 70 Lockheed Martin Corp. F-35s and 14 Boeing Co. F/A-18E/F fighters – the same quantities anticipated by Obama’s administration for fiscal 2018. Similarly, the administration is requesting eight new Navy ships, the number proposed by Obama. With Trump pledging to increase the Navy fleet to 350 ships from 275 that can be deployed today, the Navy has said it will need to request 12 new vessels in fiscal 2018 to start the acceleration.

Medicaid cuts of $610 billion would come alongside $250 billion savings – partly fueled by limiting expanded Medicaid – from repealing Obamacare. Food stamps would be cut by $193 billion.

Federal workers would see much less generous retirement benefits under the budget. Eliminating cost-of-living adjustments for retirees would save $42 billion, while increasing required employee retirement contributions would save $72 billion. And the budget would save $72 billion through cuts to Social Security Disability Insurance.

The administration has pitched its changes to student loan programs as beneficial to students. The budget would create a single repayment plan that would cap monthly payments at 12.5 percent of discretionary income, an increase from the 10 percent cap under some existing payment plans. But students would only need to repay their loans for 15 years, rather than 20, with the remainder wiped out by the federal government. That would cut the federal subsidy by $76 billion.

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