Try BlazeTV for Free
News

Fiscal conservatives are leery of Trump's first budget blueprint

Alex Wong/Getty Images

President Donald Trump, in his first joint address to Congress Tuesday, laid out a series of proposals that he said will "make America great again," but some fiscal conservatives have voiced concerns that the plan's price tag might be too high. Trump's 2018 budgetary blueprint was submitted to federal agencies for review March 14 but has not been released publicly. The White House said its completed proposal will come sometime in May.

The administration's current budget blueprint proposes allocating $603 billion in total defense spending, with another $30 billion in supplemental defense spending. The administration is recommending an additional $462 billion in non-defense, non-discretionary spending.

The proposal would add $54 billion to the current defense budget, while slashing around the same amount from other non-defense departments and agencies. Multiple outlets have reported the Environmental Protection Agency is likely to undergo some of the most severe cuts.

Trump has said his agenda would be paid for by a "revved- up" U.S. economy, citing the dismal 2 percent annual Gross Domestic Product growth under former President Barack Obama, which he has said he believes he can get up to at least 3 percent —  maybe even 4 percent. The president said that if he can achieve 3 percent annual GDP growth, it would be a "whole different ballgame," CNBC reported.

Trump's approach is based on the belief that when the government provides tax relief, individuals have more money to spend elsewhere, thus stimulating the economy on their own. Such a stimulation, fiscal conservatives argue, ultimately grows the economy by much more than the government ever could on its own.

If Trump can achieve 3 percent GDP growth, it would be historic. According to the Wall Street Journal, only five presidents since John F. Kennedy have seen such growth during their tenure: Bill Clinton (3.8 percent), Ronald Reagan (3.6 percent), Jimmy Carter (3.2 percent), Lyndon Johnson (5 percent) and John F. Kennedy (5.3 percent).

In his joint address to Congress last week, Trump laid out a series of proposals that he said can set America on the track toward growth.

Trump proposed in his joint address to Congress last week a $1 trillion infrastructure plan, financed both through private capital and public funding, but did not offer any specifics as to how he would secure private financing or how much public funding his plan would require or if it would add to the deficit.

In addition to $1 trillion in new infrastructure spending, Trump has stated he wants "massive tax relief" for the middle class, though he did not specify how large a cut he would like to see. The president has also proposed reducing the corporate tax rate, which is the highest in the developed world, but but has not specified by how much.

The current U.S. corporate tax rate is 35 percent with another estimated 4 percent of companies' revenues going for state taxes. The Tax Foundation, a conservative think tank in Washington, D.C., found that reducing the corporate tax rate by 10 points to just 25 percent, coupled with allowing companies to deduct their investments at once rather than over the course of several years, would "increase GDP about 2 percent," which would result in as much as $97 billion more in federal tax revenue each year.

The president also said his overall plan would include a "merit-based" immigration system, focused on attracting high-skilled workers rather than low-skilled, thus raising middle class wages by reducing the number of low-wage illegal immigrant jobs. According to the Heritage Foundation, there are 3.7 million low-wage illegal immigrant households in the U.S., imposing an annual net fiscal burden of around $54.5 billion on taxpayers.

Despite these savings, though, Tom Schatz, president of Citizens Against Government Waste, a conservative think tank based in Washington, D.C., told TheBlaze that he doesn't expect the president's proposal will garner the support of many fiscally conservative lawmakers in Congress.

"I'm frankly getting worried. There is simply no way the Congress is going to approve something like the Obama stimulus," Schatz said, referring to the similarities between Trump's infrastructure proposal and the American Recovery and Reinvestment Act under former President Barack Obama.

In 2009, then-President Obama signed the ARRA, which authorized $830 billion in new spending, largely for "shovel-ready" construction jobs, in an attempt to spur economic growth. Obama was later forced to admit those "shovel-ready" jobs were "not-so-shovel-ready."

Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, a nonpartisan think tank focused on fiscal and budgetary issues, told TheBlaze that at some point, the federal government must take on the issue of entitlements, which account for the majority of current federal spending.

But Trump, at least so far, has indicated that he's unwilling to touch federal entitlement programs.

“I am going to protect and save your Social Security and your Medicare. You made a deal a long time ago," Trump said during a campaign event Nov. 6 in Sioux City, Iowa, the New York Times reported. “I will do everything within my power not to touch Social Security, to leave it the way it is. I want to leave Social Security as is, I want to make our country rich again so we can afford it."

According to a 2014 report by the conservative Heritage Foundation think tank, 85 percent of the projected rise in federal spending between 2014 and 2024 was due to Social Security, Medicare, Medicaid and interest on the national debt. Social Security, which is the largest federal entitlement program, combined with Medicare, the second largest federal entitlement, account for nearly one-third of the entire U.S. annual budget.

In addition to these staggering numbers, there are also some costs taxpayers are left with as a result of entitlements.

Schatz cited a 2015 Government Accountability Office report, which found that improper Medicare payments alone totaled around $124.7 billion in 2014. That amount was up by nearly $19 billion from just the year before, and the GAO report said the increase was "primarily" due to Medicare, Medicaid and Earned Income Tax Credit programs.

Goldwein said he has proposed several steps that would help the make Social Security more solvent. His proposals include gradually slowing benefit growth based on wage increases, particularly for high-income earners, and gradually increasing the age at which Social Security beneficiaries are eligible to draw the entitlement.

Referring to younger workers who would have to retire at and older age as a result of his proposal, Goldwein said: "I think people can plan for that."

As for Medicare, Goldwein offered several ideas on how to potentially cut costs from the nation's second-largest entitlement program.

He proposed that the government should stop paying Medicare providers based on the quantity of coverage they provide, and instead compensate based on the quality of care. Goldwein explained this concept while testifying before a congressional committee in 2014:

Medicare generally pays each provider separately for their contribution to a single episode of care, creating incentives for each provider to increase utilization and providing no incentive to coordinate services. Ultimately, Medicare will need to move away from this "fee-for-service" payment model toward one that rewards quality, efficiency, and care coordination.

Goldwein also proposed encouraging recipients to use more generic drugs that are cheaper than their name-brand counterparts. Doing this, Goldwein said, would save taxpayers anywhere from $5 billion to $30 billion over 10 years.

So why, given these mounting entitlement costs, hasn't Trump indicated that he's at least willing to tackle the issue? Even the president's own director of the Office of Management and Budget, Mick Mulvaney, told the Senate Budget Committee during his confirmation hearing in January that reforming entitlements is necessary for reducing the national deficit and debt.

“It’s going to take difficult decisions today in order to avoid nearly impossible ones tomorrow,” Mulvaney said, according to the Atlantic.

When asked about this discrepancy, a White House official told TheBlaze, "The Social Security and Medicare HI trust funds are running cash flow deficits. They are not in good financial shape. We will eventually have to address both in order to protect benefits. The director was not making any definitive statements about the specific policy decisions we will make in achieving that goal."

Sen. John Cornyn (R-Texas), signaled just last week that Trump's position could change now that he is president.

“[Trump] made pretty clear that he doesn’t want to start down that path right now,” Cornyn told Real Clear Politics. "My hope is that at some point that he will because, as you know, that’s where the money is. I understand he said he wouldn’t do that during the campaign, and I think this is consistent with that. But that’s a debate we need to have, and we need to come up with a better way to deal with it."

Rep. Todd Rokita (R-Ind.), who serves on the Budget Committee, told Politico just three days before Trump was sworn in that reducing the national debt, which currently stands at more than $19 trillion, is "going to have to include entitlement programs."

Rep. Tom Cole (R-Okla.) agreed. “There is no way to balance the budget without entitlement reform. It's just simply mathematically impossible, and I think the most important thing for us is not to lose sight of that under pressure. We should write a budget that includes genuine entitlement reform," Cole told Politico.

This post has been updated with a response from the White House regarding OMB director Mick Mulvaney's previously stated views on entitlement reform.

One last thing…
Watch TheBlaze live and on demand on any device, anywhere, anytime.
try premium
Exclusive video
All Videos
Watch BlazeTV on your favorite device, anytime, anywhere.
Try BlazeTV for Free
Sponsored content
Daily News Highlights

Get the news that matters most delivered directly to your inbox.