The Trump Budget and How We Spend Our Money

I have not written for about a week simply because I have been busy but in that time the Trump Administration has released its budget. The liberals in Congress and around the nation have pounced on this document like it is some holy grail and will become law in the next few months. So the question that I have to ask them is simple: When was the last time a President submitted a budget that Congress passed without carving it up like a Thanksgiving turkey?

Presidential budgets are basic blueprints of what the administration would like to see accomplished with federal spending. It is submitted to Congress and the process begins. There will be hearings in the budget committees of both houses and in the end they will attempt to pass a budget resolutions.   Budget resolutions are not enacted into law and are not submitted to the President. They are the blueprint that Congress will attempt to follow for that year and succeeding years. They are not always successful in passing this resolution and in recent years failure has been more the norm. Congress did not pass a budget resolution in 2011, the House passed one in 2012 and 2013 but could not get it through the Senate, in 2014 both the House and Senate passed their budget resolutions but could not agree on a final version and finally in 2016 they passed one that made it through both the House and Senate and the Conference Report.

So what you see is not only does the President’s budget submission have very little effect on what Congress does but Congress itself does not agree on a budget very often in recent years. This is the result of the growing polarization and highly partisan nature of the Congress. To many conservatives and liberals dig their heels in and refuse to compromise.

As I look at the Budget submitted by the President I see a couple of things that jump out. First, he is living up to a campaign promise to increase defense spending and to cut the size of government. That means the amount of money spend on national security and homeland security will go up and the amount of discretionary spending on domestic programs will go down. The term that administration is using is “America First” in describing their budget. The budget boosts defense outlays by $54B and cuts the same amount from other program. As an example, State Department has seen cuts of about 28% with most of it in foreign aid and the EPA is seeing its budget cu by 28%. Before anyone gets too excited I want to point out very clearly, those cuts are not going to happen at those levels.

The Administration is going to run into strong headwinds from both Republicans and Democrats who have vested interests in many of the programs targeted by the budget submission.   When you look at what the budget is proposing you see the blueprint that has been laid out.

2018 budget blueprint

Cabinet Departments

  • USAID down 28.7%
  • Agriculture Dept down 20.7%
  • Labor Dept. down 20.7%
  • Other Energy Dept. down 17.9%
  • Health and Human Services down 16.2%
  • Commerce Dept. down 15.7%
  • Education Dept. down 13.5%
  • Transportation Dept. down 12.7%
  • Interior Dept. down 11.7%
  • Energy Dept. down 5.6%
  • Treasury Dept. down 4.4%
  • Justice Dept. down 3.8%
  • HUD receipts 0%
  • Justice Dept. mandatory changes 0%
  • Veterans Affairs up 5.9%
  • Homeland Security Dept. up 6.8%
  • Defense Dept. up 10%
  • National Nuclear Security Admin. up 11.3%
  • HUD gross total up 13.2%

Major Agencies

  • Environment Protection Agency down 31.4%
  • Core of Engineers down 16.3%
  • Other agencies down 9.8%
  • Small Business Admin. down 5.0%
  • NASA down 0.8%
  • General Services Admin, 0.0%
  • Social Security Admin. up 0.2%

As each individual looks at these cuts and pluses they will see many that they agree with and they will see some they disagree with. That is the role of Congress. To actually begin to flesh out what the real budget will be for each of these Departments and Agencies. To get to these numbers the Administration has suggested that a lot of programs be eliminated as unneeded or not the responsibility of the federal government. A lot of things currently being paid for by the federal government will be turned over to the states. Below is a brief list of some specific programs that have been recommended for elimination with some comments in italics by myself to each one. I probably support eliminating the vast majority of them but they have constituencies out there that will fight for their particular program.

  • The African Development Foundation, which funds African agriculture, infrastructure and community development projects with grants. This is one that might survive simply because any effort to develop food production in Africa is considered a good thing.
  • The Appalachian Regional Commission, which funds projects meant to bolster businesses, education, culture, and economic development in Appalachia. This agency is one that needs to be eliminated. There is no real purpose for it having been created.
  • The Chemical Safety Board, which investigates accidents in the chemical industry and makes safety recommendations. Surely someone else in the government can do this agency’s work.
  • The Corporation for National and Community Service, which houses several public service organizations, including AmeriCorps. If you really want this then get the funding from donations.
  • The Corporation for Public Broadcasting, which funds public television and radio stations including PBS and NPR. A purely liberal group and if the liberals want it have George Soros fund it. Really, have you ever heard a conservative opinion on NPR.
  • The Delta Regional Authority, which funds businesses and infrastructure in the Mississippi River Delta region. Same as the Appalachian Commission, why?
  • The Denali Commission, which supports utilities and infrastructure in Alaska. This is a state job, not the federal government.
  • The Institute of Museum and Library Services, which funds U.S. museums and libraries with grants. Another one that could save funding.
  • The Inter-American Foundation, which provides financial aid to Latin America and the Caribbean. This should be done under US AID. Why have duplication.
  • The U.S. Trade and Development Agency, which provides U.S. goods and services for foreign development projects. Cut it and save the money. The global market take care of this activity.
  • The Legal Services Corporation, which provides civil legal aid for low-income Americans. This one should probably survive and it actually does some good.
  • The National Endowment for the Arts, which funds American artists and projects through grants. If you have ever looked at a list of what they fund you will start pulling hour hair out. Eliminate it immediately.
  • The National Endowment for the Humanities, which funds American scholarship through grants. Let the private sector handle this with donations.
  • The Neighborhood Reinvestment Corporation, which funds community development project throughout the U.S. Borderline whether this one should survive.
  • The Northern Border Regional Commission, which supports economic development in poor areas near the Canadian border. Start laughing now because you wonder who got this started and how it continues to get funding.
  • The Overseas Private Investment Corporation, which helps provide private U.S. capital to foreign development projects. OPIC has been around a long time but I would take a hard look at it and see what the cost benefit analysis looks like.
  • The United States Institute of Peace, which aims to promote world peace through conflict resolution, training programs and scholarship. Another government waste of money hiring people to make up stuff to justify themselves.
  • The United States Interagency Council on Homelessness, which coordinates efforts to fight homelessness among nearly 20 federal agencies. Cut it and let the states handle this issue.
  • The Woodrow Wilson International Center for Scholars, a prominent think tank studying international affairs and foreign policy. Why is this think tank funded and those like Heritage, Brookings and AEI not?

I have not listed the poster child of the left, Meals on Wheels, simply because it is not a federal program and it is not funded directly by the federal government.  This is a program funded primarily by private donations and with some state assistance which varies from state to state.  There is some funding from Community Development Block Grants which the budget would slash.  But the real truth is this program will survive and all the hyperbole from the left will be just that, hot air.

So now we are the point where Congress will have their budget hearings, the authorizing committees will hold hearings and pass and authorization bill and the appropriations committees will hold hearing and pass the actual spending allocations. Along this line the numbers will continue to evolve and change and in the end will not even resemble the budget submitted by the President.

Let me end this blog piece with what I think is the real problem facing our nation. We have become a nation of “I want” people. Everyone has something the want the government to provide funding for and most likely this is because it has a direct impact on their lives. In many cases you have people and members of Congress saying if you support what “I want” I will support what “you want.” And so government grows and spending keeps increasing. We are now facing a national debt in the area of $20 Trillion dollars. I want you to read an excerpt from the Congressional Budget Office (CBO) report that they submit annually on the Long-Term Budget Outlook. If this does not scare you then you are in the minority.

If current laws remained generally unchanged in the future, federal debt held by the public would decline slightly relative to GDP over the next few years. After that, however, growing budget deficits would push debt back to and above its current high level. Twenty-five years from now, in 2039, federal debt held by the public would exceed 100 percent of GDP. Moreover, debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely. By 2039, the deficit would equal 6.5 percent of GDP, larger than in any year between 1947 and 2008, and federal debt held by the public would reach 106 percent of GDP, more than in any year except 1946—even without factoring in the economic effects of growing debt.

We are now spending over $225B annually to service this debt and it is growing. The only thing holding this down to this level is the artificially low interest rates that the Fed had used to stimulate economic growth. We have now seen those rates rise by 25 basis points twice this year and the indicators are more rate increases are on the horizon. That will increase how much we are paying to service the debt.

I will have 12 grandchildren by the end of this year and I don’t think it is fair to pass this tremendous burden of debt on to them simply because my generation does not want to make the hard choices. The most heartening thing about the budget submitted by the President is that someone is finally recognizing the folly of continued rampant spending by the Federal government and admitting that we have to start applying some business acumen and principles to how we spend the public’s money.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s