Without going into philosophical, ethical, or other more esoteric costs, today I take a look at the real costs of the proposed budget we’ve just seen from the White House. The best case scenario for this budget will result in massive increases to the deficit; the worst case scenarios include huge spikes in poverty among already vulnerable groups in the US and long-term damage to our economy, both domestically and internationally.
The proposed budget itself
45’s first budget proposal will increase spending for defense and security by $54 billion to $603 billion and cut approximately the same amount from non-defense discretionary spending programs bringing them down to a collective total of $462 billion. This will mean that most federal agencies and what the 45 team deems “low priority programs” will see reduced, if not decimated, budgets.
This version of the proposed budget will serve as a kind of blueprint. From here the agencies will start in their attempts to show how they will be able to function within their proposed budgetary constraints. The White House plans to have a more formal version of the budget to Congress for approval by March 16. The executive’s goal is to have the budget in final form by early May.
Thus far, CNN reports that 45 officials indicate that all $54 billion will be cut within fiscal year 2018. According to the White House, those most likely to feel the cuts the most are the Environmental Protection Agency (EPA) and all forms of foreign aid.
The departments of Energy and Commerce will also experience major budget cuts; expect to see their programs either eliminated or transferred to other agencies. The departments of Justice, State, and Transportation would see similar if slightly less drastic cuts and eliminations.
The Department of Energy will experience cuts in funding for advanced scientific computing research and nuclear physics to 2008 levels. The Office of Electricity, Office of Fossil Energy, and Office of Energy Efficiency and Renewable Energy are all set to be eliminated; these focus on cleaner and more efficient energy and technologies to reduce carbon dioxide emissions.
At the Department of Justice, 45’s plan is to eliminate the Legal Services Corporation, Violence Against Women Grants, and the Office of Community Oriented Policing Services. Funding for the Environment and Natural Resources and Civil Rights divisions are set to be drastically reduced.
The State Department’s programs targeted for elimination are the United Nations’ Intergovernmental Panel on Climate Change, the Paris Climate Change Agreement, and the Overseas Private Investment Corporation.
The National Endowment for the Humanities and the National Endowment for the Arts are slated for elimination. The Corporation for Public Broadcasting is set to be privatized.
The White House has also indicated that the proposed budget will include funds for the infamous border wall construction project. It is possible that costs for the wall will be rolled into the billions that will augment the boost to defense spending based on the administration’s rhetoric justifying these policies and changes.
The rationale for the radical proposed budget
“I want the American people to know that our budget will reflect their priorities,” 45 alleged in a budget meeting earlier in February 2017. “We’ll be directing all of our departments and agencies to protect every last American and every last tax dollar. No more wasted money.”
This is a bizarre statement, however, given the shocking level of waste already exhibited by the administration. For example, in the space of one month, the travel costs of the Family Von Trump have cost the taxpayers as much as an entire year of travel for the Obamas. This is particularly disturbing when we consider the costs incurred by the adult Trump children who are traveling to enrich the Trump family businesses, and the fact that 45 himself has continuously traveled to Florida for his golfing weekends, not for any official purpose.
If this budget seems unusual to you, that’s because it is. In fact, it is a dramatic change to the federal budget. Steve Bannon has explained to the Conservative Political Action Conference (CPAC) this past week that the explicit aim of the White House is the “deconstruction of the administrative state,” which will begin with the weakening and possible elimination of the administrative agencies. This budget has been carefully crafted to support that goal.
“With 20 trillion dollars in debt, the government must learn to tighten its belt,” 45 argued to his audience of super rich Americans (after his family’s month of out of control travel spending).
What will happen under this new budget
The proposed budget and the overall economic plan for the US proposed by 45 and his cronies will be no less than catastrophic from a practical, economic standpoint. Here are some of the many ways that this budget and financial plan will go awry.
Cutting foreign aid
Thus far, CNN reports that 45 officials indicate that all forms of foreign aid are likely to be cut. However, given that foreign aid represents only about one percent of the US budget, even cutting all foreign aid completely is unlikely to help Team 45 reach their austerity goals in any meaningful way.
Furthermore, since so many foreign aid programs are intimately connected to the successful implementation of national security policies, their absence is likely to have broader impact on our national security—and for what is ostensibly a budget that is entirely focused on defense and security, this appears to be a major misstep.
According to the American Action Forum, a conservative policy institute in Washington D.C., even simply enforcing the immigration laws that are already on the books right now would be extraordinarily expensive: about $400 billion to $600 billion. This massive project would take about 20 years to realize, not a matter of months as 45 has claimed.
In the process of enforcing these current laws, the US labor force would lose 11 million workers, most of whom hold jobs that are not readily taken by American citizens. The impact to our real GDP would be about $1.6 trillion. In short, Doug Holtz-Eakin, president of the American Action Forum argues, “It [would] harm the U.S. economy. Immigration is an enormous source of economic vitality.”
Now, consider this: our existing immigration laws are not strict enough for the White House. They want to create and enforce more onerous laws at even higher costs which will inevitably deal even more serious blows to our economy and labor force.
Agriculture would be irreparably harmed by full enforcement of existing laws, and this has never been clearer than it is now. Agricultural workers and farmers are both concerned about the sweeps that have been happening nationwide. Most experts agree that the mass deportations proposed by 45 will collapse the agricultural industry.
The result of this will be less farm income and higher food prices for everyone.
Another specific immigration change 45 has proposed will have direct impact on our economy: increasing the prevailing wage requirements for H-1B visas that let American businesses recruit and employ foreign professionals. The stated goal is to make it cheaper for companies to hire Americans. However, in practice this doesn’t help us as a country overall even if it may benefit certain individuals from time to time.
As the US continues to experience lagging educational and achievement in STEM subjects in particular, H-1B visas will be even more critical to our economy. Furthermore, these visas are not used to underpay foreign workers instead of US workers; in fact, that is illegal regardless of the visa. The idea that somehow foreign workers are undercutting US workers is simply part of the MAGA mythology, and facts to the contrary be damned.
Taxes: cuts, deficits, and failed funding
45’s tax plans benefit the richest Americans the most, by far. This will be particularly notable if the plan to eliminate estate tax does come to fruition. According to the IRS, in 2015, almost 12,000 estate tax returns generated $17.1 billion in revenue for the government—more revenue that will be missing from the budget.
In any event, 45’s tax plans aren’t all gravy for Americans. In fact, some middle class taxpayers will actually be paying more. Single parents will also find themselves penalized.
The plan also reduces revenue significantly, and is very likely to cause the federal budget deficit to skyrocket. Without spending cuts that balance this out at the same time, this deficit jump will be immediate.
“I can’t imagine markets would react well to it. I can’t imagine global investors looking to relocate will look on a United States that is driving deliberately over a fiscal cliff,” Holtz-Eakin told The Street. “Sending the U.S. into a debt spiral where you’re borrowing interest on previous borrowing will generate a market reaction that will be far from benign and that will, I think, in the end overwhelm the beneficial effects.”
45 has already begun an informal assault on US trade policy in that he has insulted trade partners like Mexico and made it clear that he will antagonize countries like China and remove us from the Trans-Pacific Partnership. The formal assault is forthcoming.
45 focuses on China and currency manipulation, but this is an ill-conceived core focus. Michael Busler, professor of finance at Stockton University, explains to The Street:
“The reality is that when China devalues its currency, the goods that they produce become cheaper, and as a result, while we may lose some manufacturing jobs, the rest of the population gets to buy things a lot cheaper than they would if the products were made [in the US]. The jobs he would bring back are yesterday’s jobs.”
In other words, a focus on jobs which are never really going to come back anyway in the proposed budget will result in drawbacks for all American consumers, not to mention international relationships. The idea of placing high tariffs on goods imported from Mexico—whether they are intended to pay for a border wall or not—is likely to have a similar effect.
The Trump “brand” versus the place of the US in the world
Although not a formal component of the proposed budget, Trump’s brand is an important factor here. The brand, expressed through uncensored, volatile, and even unstable Tweets in the middle of the night, might work for his businesses, but they are not good for our national economy. Words from US officials have serious affects on national and world markets.
John Hudak of the Brookings Institution, a Washington, D.C. think tank, simply tells The Street: “His brand of rhetoric would actually make for profound economic instability.”
Entitlements and benefits for the poor
Most of the Republican establishment is deeply committed to cutting Social Security, Medicaid, and Medicare to achieve more balance alongside the increased spending 45 proposes. Despite the White House’s insistence that these programs will not be cut, it seems very likely that these programs will experience cuts in the context of making 45’s proposed budget feasible.
“I don’t think you can do infrastructure, raise defense spending, do a tax cut, keep Medicare, Medicaid and Social Security just as they are, and balance the budget. It’s just not possible,” Rep. Tom Cole (R-Okla.) of the House Budget Committee told Politico. “Sooner or later, they’re going to come to grips with it because the numbers force you to.”
We can also expect to see cuts to Food Stamps, and other programs for the poor. As stated above, the right to an attorney will be slashed by this budget, but that’s not where the cuts will stop.
Ben Carson’s HUD will almost certainly slash Section 8 housing, or eliminate it altogether over time. Thus far the White House’s attention to TANF (traditional welfare benefits to the poor) and Food Stamps in the proposed budget have been connected to whether or not immigrants are using these programs (even though immigrants are not eligible for these programs). The continued focus on these programs suggests that they will hit the chopping block too, even though this will have nothing to do with immigration.
Secretary of Education Betsy DeVos has recently indicated a desire to return both philosophically and literally to the days of there being “no such thing as a free lunch,” even for school-aged children living in poverty. This stance, while targeting the most helpless Americans, will probably be fairly easy to implement.
The bottom line
45’s proposed budget includes increases in military spending, tax cuts, and a massive infrastructure program which will significantly increase the national debt and federal deficit. The only way to avoid this would be to match them with similarly large spending cuts and tax hikes, but this will be very difficult to do. Congress is likely to reject any tax increases that do not benefit corporations. The ACA is a huge target for Congress, but they are experiencing some pushback from the people; they will get the most fight on Medicare and Social Security cuts—cuts that might have a prayer of offsetting 45’s expenses.
Perhaps most concerning about all of this is the fact that we can assume that 45 and his team will lie constantly about the facts surrounding spending, the proposed budget, their actions, and their intentions. We can also assume based on the existing evidence that they will not feel obliged to follow the law. This could mean anything, from 45 attempting some kind of line-item veto to reject portions of appropriations despite his lack of authority to do so, to impounding domestic spending and ignore the procedural rules as he does that.
“A balanced budget is fine,” 45 told Fox News in January. “But sometimes you have to fuel the well in order to really get the economy going.”
He added: “I want a balanced budget eventually. But I want to have a strong military.”
In other words, he has no compunctions about making these massive, disastrous changes and sticking us with the bill, just as he will stick us with the bills for his family members’ traveling so they can earn more money for Trump businesses. Regardless of how long a period of time he occupies the White House, it will come at an astronomically high cost—even based on his own numbers.