A Military Buildup and Big Tax Cuts: Is the Debt Set to Soar Under Trump?
Policy + Politics

A Military Buildup and Big Tax Cuts: Is the Debt Set to Soar Under Trump?

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With ambitions to more than match the Reagan-era military buildup, President Donald Trump and his advisers are preparing a budget plan calling for huge spending increases on defense while cutting domestic programs deeply.

Trump last month ordered Defense Secretary James Mattis to come up with a comprehensive plan within two months to improve overall readiness in the armed services by fiscal 2019, including updating the nuclear arsenal and strengthening defenses against a possible nuclear attack by North Korea or Iran. He is also calling for a major buildup of all four branches of the military, including more troops, jet fighters, ships and other weaponry.

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Trump this week mentioned the importance of reining in a national debt fast approaching $20 trillion, and he lectured senior White House economic advisers that “we need to do a lot more with less” in his first comments about the budget in advance of the release of his proposals by mid-March.

However, he also indicated that a balanced budget was unrealistic for the time being as he tries to reconcile his fiscal responsibility rhetoric with campaign pledges to slash taxes by trillions of dollars, build a wall along the nearly 2,000-mile long southern border, protect Social Security and Medicare from cuts and bulk up the military.

William A. Galston, a senior fellow at the Brookings Institution and a one-time policy adviser to President Bill Clinton, said on Friday that Trump’s “budgetary logic” is dangerously similar to that of the Reagan administration, which pursued a big defense buildup and tax cuts, only to touch off nearly two decades of struggle to contain rampant deficits -- including major cuts in social safety-net programs.

“If history repeats itself, the beginning of the Trump administration will be the high water mark for deficit spending, and then the equilibrating political forces will set in,” he said. “It seems like a formula for rising government spending, falling government revenues and much larger deficits – on top of large existing deficits.”

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Last month, the non-partisan Congressional Budget Office (CBO) projected that after seven years of declines, the federal budget deficit is projected to surge again and will add nearly $10 trillion to the federal debt over the next decade. The Committee for a Responsible Federal Budget calculated last year that Trump’s corporate and individual tax cuts and spending initiatives would add $5.3 trillion more to the national debt in the next ten years.

Although much of this is still in the planning stages, the new administration is likely to ask Congress to raise spending caps to provide an additional $30 billion to $40 billion for defense in the current fiscal year that runs through Sept. 30, and $54 billion more next year. That would bring total spending on personnel, military hardware and other defense contracts to at least $603 billion in fiscal 2018, according to Justin Bogie, senior policy analyst at the conservative Heritage Foundation.

But even that massive figure – one that would eclipse defense spending by President Ronald Reagan in the early 1980s – doesn’t tell the entire story. Trump and the GOP-controlled Congress will likely approve another $74 billion of emergency spending in 2018 from a special Overseas Contingency Account that has been used finance U.S. combat operations in the Middle East. Those funds don’t need to be offset by corresponding spending cuts in other parts of the budget and will directly add to the deficit.

At the same time, Trump and his advisers are expected to offset some of that increased defense spending by slashing non-defense discretionary spending by as much as $54 billion next year. This would involve lowering the domestic program spending ceiling that was set under the 2011 Budget Control Act from $516 billion to $462 billion.

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The New York Times reported last week that an Office of Management and Budget “hit list” has targeted nine long-standing programs with strong Democratic support, including the Corporation for Public Broadcasting, the Legal Services Corporation, AmeriCorps and the National Endowment for the Arts and the Humanities.

But even if all of those programs were eliminated, it would only save about $2.5 billion a year – a relative drop in the bucket compared to all of Trump’s spending that needs to be offset.

The Heritage Foundation, which is closely allied with the Trump administration, has proposed scores of other cuts that would save billions more – including funding for National Infrastructure Investment (TIGER) grants, technology innovation, Department of Energy loan programs, and other business incentive programs that conservative critics dismiss as “crony capitalism.”

“I think the real highlight will be on the discretionary spending side,” Bogie said in an interview. “You’re going to see a big plus-up in defense to pay for a lot of the campaign promises that Trump put out there. You’re going to see a big slash to a lot of these non-defense programs that a lot of people like and that have been funded for many years to pay for that.”

Indeed, Robert Greenstein, president of the liberal-leaning Center on Budget and Policy Priorities, told The New York Times yesterday that he is worried “that we are going to see the biggest cuts that any president has ever proposed in programs for low- and moderate-income families.”

Related: Prospects Dim for Deficit Control as Trump Drives for Defense Buildup

But fiscal conservative groups -- wary that Trump and his advisers may be leading the country into a renewed era of trillion-dollar-a-year budget deficits comparable to the red ink that flowed during the worst of the Great Recession -- say the new president must seriously address rising entitlement costs.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said on Thursday that Trump’s first budget “will tell us just how serious he is about taking on our record-high national debt.”