Trump Lays Out Discretionary Spending Blueprint

President Trump released a “skinny budget” this week, laying out his Administration’s priorities for discretionary spending, which account for about 30 percent of the budget. His complete budget proposal is expected to be released sometime later in the spring.

The blueprint matches his campaign pledges, and fills in some of the missing details on the discretionary side. He would boost discretionary outlays by a net of $13 billion in the remainder of the current Fiscal Year 2017, and relative to current law, would decrease net next year’s cap by the same amount. Defense and homeland security, arguably his top two campaign priorities, would see significant spending increases. As a presidential candidate, Trump advocated for a Penny Plan to reduce spending by 1 cent for each dollar spent outside of defense, homeland security, veterans’ issues, and entitlement programs. His blueprint follows through on that pledge: the spending hikes would be offset through FY 2018 by reductions in non-defense discretionary spending. Trump lays out a bold, broad list of programs to cut or eliminate, including:

“the African Development Foundation; the Appalachian Regional Commission; the Chemical Safety Board; the Corporation for National and Community Service; the Corporation for Public Broadcasting; the Delta Regional Authority; the Denali Commission; the Institute of Museum and Library Services; the Inter-American Foundation; the U.S. Trade and Development Agency; the Legal Services Corporation; the National Endowment for the Arts; the National Endowment for the Humanities; the Neighborhood Reinvestment Corporation; the Northern Border Regional Commission; the Overseas Private Investment Corporation; the United States Institute of Peace; the United States Interagency Council on Homelessness; and the Woodrow Wilson International Center for Scholars.”

Additional proposals and reforms include:

  • Federal Aviation Administration: Trump’s blueprint includes a plan to reform and modernize the air traffic control system by transforming it into a new independent, nonprofit corporation. The new air traffic control entity would be funded through user fees that would cover its annual costs.

  • Amtrak: Subsidies would be reduced to Amtrak’s inefficient lines where they are operating at a loss.

  • Target Corporate Welfare: The blueprint would eliminate the unnecessary Economic Development Administration, saving $221 million, the Manufacturing Extension Partnership, saving $124 million, and the Overseas Private Investment Corporation, saving $70 million.

There are a handful of fees in the blueprint in order to, as the budget notes, “ensure that the cost of Government services is not subsidized by taxpayers who do not directly benefit from those programs.”

  • Bankruptcy-filing fee hikes would produce an additional $150 million over the 2017 annualized amount.

  • The budget also “[r]ecalibrates Food and Drug Administration … medical product user fees to over $2 billion in 2018.” This would increase receipts by $1 billion over the 2017 level, and would obviate the need for increased budget authority.

  • The Passenger Security Fee would be increased to “recover 75 percent of the cost of … aviation security.” However, this fee was recently raised in the Bipartisan Budget Act of 2013 and a portion of the proceeds were devoted to general deficit reduction.

What’s not included in this blueprint:

  • A complete budget forecast providing a 10-year budget window;

  • A revenue projection – which will ultimately depend on the Administration’s comprehensive tax reform plan; and,

  • Details on entitlement spending, however, the American Health Care Act would repeal and replace the Affordable Care Act, is projected to reduce direct spending by $1.2 trillion over the next ten years.

The savings in the proposal are used to offset proposed spending hikes rather than deficit reduction. But all in all, this blueprint presents a path to balance by addressing waste and duplication throughout the federal bureaucracy. While the comprehensive tax reform Trump campaigned stands to improve economic growth that will lead to enhanced tax revenues down the road, to stay on this path, the President will have to address the looming shortfalls in the big entitlement programs that are driving long-term debt.