Pay Off the Debt? Trump Is Adding Trillions to It

Plus, a look inside his massive Pentagon budget plan

Pay Off the Debt? Trump Is Adding Trillions to It

Time after time in recent years, Republican budget writers have tried harder than Olympic gymnasts to achieve balance. In a sometimes quixotic-seeming quest to wipe out the federal deficit within 10 years, they’ve resorted to using overly optimistic economic assumptions, questionable math, “magic asterisks” and a variety of other gimmicks.

President Trump’s budget proposal for fiscal 2020, released Monday, uses a number of those tricks. It forecasts GDP growth much stronger than most independent projections, with no recession in sight even as the current economic expansion is already poised to become the longest in U.S. history. It proposes to cut some $2.7 trillion from non-defense discretionary spending, with drastic reductions to education, health care and other areas that have no chance of being adopted by Congress.

It’s notable then that, even with all that, Trump’s budget doesn’t propose to balance in the typical 10 years. Instead, the White House says it would reach balance in 15 years, by 2034.

Trump’s budget claims to substantially reduce the deficit. The shortfall would go from $1.1 trillion, or 5.1 percent of GDP, in 2019 to $202 billion, or 0.6 percent of GDP, in 2029. In the interim, though, the budget projects three more years of deficits over $1 trillion. In all, the budget would borrow $7.8 trillion over the next 10 years — and using more reasonable economic assumptions, the Committee for a Responsible Federal Budget finds that it would add closer to $10.5 trillion to the national debt — a far cry from Trump’s wild 2016 campaign assertion that he could eliminate the debt within eight years.

The new projections underscore just how much the debt is growing under his administration, and how hard that will be to change. “The president makes heroic assumptions about economic growth and deep cuts to domestic discretionary spending and health care, and yet he still can’t balance the budget,” Brian Riedl, a senior fellow at the Manhattan Institute and former chief economist for Sen. Rob Portman (R-OH), told The Washington Post.

Trump’s tax cuts, and the spending deal he grudgingly signed last year, are big reasons the debt is surging. At the same time, Trump’s budget does relatively little to address the long-term drivers of the debt, namely mandatory spending on programs like Medicare and Social Security (see chart below). It does propose some cost-saving Medicare reforms, mostly through reductions in payments to providers, and it seeks an overhaul of Medicaid that could convert the program to a system of block grants to the states. The White House, meanwhile, still argues that the tax cuts will pay for themselves. “Economic policies in this budget will generate more than enough revenue to pay for the costs of the tax cut," Acting Office of Management and Budget Director Russ Vought said Monday.

There’s little evidence to support that claim, and the numbers in Trump’s budget highlight the challenges in cutting taxes and slashing spending as a path to deficit reduction. “Trump’s own budget calculations show that reducing taxes and making heavy cuts to domestic programs do not balance the budget (at least not for 15 years and not without some big assumptions),” The Washington Post’s Heather Long says.

Not that the 15-year timeframe is itself problematic. In fact, Maya MacGuineas of the Committee for a Responsible Federal Budget says she applauds the longer timeframe as a more achievable goal — except that the rest of Trump’s budget is littered with gimmicks and problematic assumptions. “Yes to a realistic goal, but it doesn’t amount to anything unless it coupled with realistic policies,” she said.

But there’s little appetite in Washington for deficit reduction these days. “Concern about the deficit is so woefully out of fashion that it’s hard to even imagine it coming back into fashion,” Rep. Jim Cooper (D-TN) told the Associated Press the other day. “This is as out of fashion as bell bottoms.”

Inside Trump’s Massive $750 Billion Defense Request

President Trump’s 2020 budget calls for a record $750 billion in spending for national defense. Here are some key facts and figures related to the huge military budget request:

  • The request is about $33 billion higher than the 2019 appropriation, an increase of 5 percent.

     
  • The Department of Defense would claim about $718 billion of the total, with the remaining $32 billion designated for national security missions within other branches of the federal government (i.e., the nuclear weapons programs at the Department of Energy).

     
  • The base budget would be $544 billion.

     
  • About $165 billion would be directed to Overseas Contingency Operations, a special fund that is not subject to budget caps and is intended to be used to fight the post-9/11 wars — but in Trump’s budget is being used for a variety of other programs.

     
  • Roughly $9 billion would be spent in a new account called “emergency requirements,” part of which would be used to backfill funds that may be shifted this year from military construction projects to build part of the border wall.

     
  • Space operations would receive $14 billion, including $72 million to establish a headquarters for the proposed Space Force.

     
  • Operations and maintenance would receive $293 billion.

     
  • $155 billion for military personnel, including a 3.1 percent pay raise.

     
  • A record $104 billion for research and development.

     
  • $22 billion for military construction and family housing.

     
  • $11 billion to purchase 78 F-35 stealth jets, six fewer than current plans.

     
  • $3 billion for the development of the B-21 bomber.

     
  • $2 billion to modernize 166 M-1 Abrams tanks.

     
  • $1 billion to purchase eight F-15X Advanced Eagle fighters.

Analysts say Trump’s budget is “dead on arrival,” like most presidential budgets. But the defense request spells out the Pentagon’s latest priorities, and a modest budget increase could be in the cards as part of a congressional deal to increase domestic spending. The decision to use the Overseas Contingency Operations fund to sharply increase defense spending while avoiding potential budget caps could be a problem, however, with lawmakers from both parties having decried the maneuver as a problematic “gimmick.”

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Spending More for Less Health Care

An analysis by the Health Care Cost Institute of more than 1.8 billion medical claims found that prices for health care services rose about 13 percent between 2012 and 2016, while usage dropped by about 17 percent.

The institute examined medical services in 43 states and 112 localities and found a wide variation in costs and frequency of usage in different parts of the country. Some areas had similar prices but dissimilar usage while others had roughly the same level of usage but at very difference prices.

"To us, the most interesting finding was just the extent of variation—not only in how much the same services cost or were used in areas across the country, but also in how price and use compared within metros. There were plenty of examples where you could find two metro areas where prices were essentially the same. For example Oxnard, California, and New Haven, Connecticut—New Haven used almost 50% more services,” Bill Johnson, a researcher with HCCI, said. "What this variation suggests is that there is really a different story explaining healthcare costs almost everywhere you look.”

HCCI presents its findings in an interactive map that lets you call up pricing and usage data. Review medical prices and usage in your area at HCCI’s Healthy Marketplace Index.

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