President Trump Dreams Big in First Joint Address to Congress, but Leaves Out Budget Realities

In his first address to a joint session Congress, President Donald Trump urged the nation to dream big while laying out spending proposals that would make the budget bigger. The net impact of the proposals Trump presented with specificity would boost outlays by $894 million per year. However, the cost could be significantly higher due to a dozen policy proposals whose costs could not be determined due to lack of information.

NTUF identified six policies offered in the speech that would increase outlays:

  • Defense: He vowed to eliminate the sequester and “rebuild the military.” The White House has called for a 10 percent boost in the defense budget resulting in a $54 billion increase.

  • Infrastructure: Trump called on Congress to pass a $1 trillion plan that would utilize a mix of public and private funding. NTUF assumes that at least $32 billion in annual federal funding would be available for spending through a one-time repatriation tax incentive that was similar to a proposal in President Obama’s FY 2017 budget. It is unclear what mix of additional spending or tax incentives will be required to spur public-private partnerships to finance the full amount of Trump's $1 trillion plan.

  • Health Care: NTUF assumes that Trump would support re-establishing funding to states in support of high-risk pools for individuals with pre-existing conditions. Related proposals would cost up to $8 billion per year. He also repeated his call to permit the purchase of health insurance across state lines, which, according to a pre-Affordable Care Act estimate, would cost an inflation-adjusted $38 million per year.

  • Border Wall: Completing a barrier along the remaining unsecured southern border would cost at least $12.6 billion, and NTUF assumes the construction would be finished in five years.

  • Paid Family Leave: Based on information provided by Trump’s election campaign in 2016, NTUF estimated that providing a new federal paid leave benefit would increase outlays by $1.9 billion annually.

Trump specified two areas of potential quantifiable savings. Repealing the Affordable Care Act (ACA) would reduce outlays by $94 billion per year, however, there would be costs associated with a replacement plan which are currently unknown. He also advocated for legal reforms “that protect patients and doctors from unnecessary costs that drive up the price of insurance.” A similar medical tort reform would reduce spending in federal healthcare programs by $3.4 billion. While he indicated that his administration will be seeking significant savings from the federal government’s $500 billion contracting budget, details are still unclear.

The President also spoke of the need to bring down the cost of prescription drugs. He has previously supported a plan to permit the importation of prescription drugs. While this may sound like a free trade stance, this policy could have adverse impacts due to the fact that other countries have set price controls on medication. These controlled prices would essentially be imported, diverting resources from the development of new drugs that will save lives and lead to health care savings.

In addition to the unknown costs associated with replacing the ACA, Trump proposed unspecified potential spending increases for veterans, women’s health care, expanding treatment for addiction (on top of two recently enacted laws that provided over $1 billion in funding), defeating the Islamic State, school choice, and to “promote clean air and water.”

The President also repeated a call for tax relief for corporations and individuals. Yet, he also talked about the possibility of implementing unilateral tariffs against certain countries. Recent history has shown that increasing protectionist tariffs on imported goods lead to unintended consequences that increase costs for consumers and ultimately lead to job loss.

While media reports have indicated that the Administration would seek savings by eliminating a number of programs (link to post), the President chose not to highlight those potential offsets to the spending he promoted in his address. On the plus side, the net cost of Trump’s inaugural address to Congress is far less than the ones given by Presidents George W. Bush and Barack Obama. But, taxpayers will have to wait for the President to officially introduce his budget to get clarity on how he plans to address the nation’s long-term and unsustainable overspending problem.