On the 125th day of the Trump Administration, the White House’s Office of Management and Budget (OMB) released its FY 2018 budget proposal. Right from the start they cast it as a vision we can look forward to in nine years by imagining, “… the wonders we could achieve by America’s 250th anniversary of our Independence if we set free the dreams of our people by removing the barriers holding back our economic growth.”
It’s bold, it’s ambitious, and this budget proposal will spark fierce debates across both aisles of Congress.
The White House has titled this budget proposal, “A New Foundation for American Greatness,” which mirrors the spirit of populism and “MAGA” energy that ushered President Trump into office. The underlying assumptions are we’re currently in a period of economic stagnation that was produced by a combination of bad trade deals, federal regulatory burdens, high business taxes, and under investment in business.
That combination exacerbated the debt picture and now our federal debt has ballooned in total beyond $20 trillion. How we got here and how we navigate tough trade-offs ahead is subject to much ballyhooed Washington fiction.
This budget proposal prioritizes large increases for military defense spending, sets the stage for infrastructure investment, while finding similarly large cost savings by reducing discretionary and mandatory program spending, including:
- Defense spending: A YoY 8.2 percent increase proposed to $643 billion in FY 2018, with a long-term budget goal of $722 billion by 2027 – effectively a 21.5 percent increase over today’s spending level
- Non-defense discretionary spending: A YoY 3 percent decrease to $601 billion in FY 2018, with a long-term budget goal of $429 billion by 2027, effectively a dramatic 30.6 percent decrease over today’s spending level
- Infrastructure initiative: Proposed new $5 billion investment starting next year, reaching an apex of $50 billion annually in 2021, and ending in 2026.
Inside of these proposals are steep cuts to programs that underpin the social support fabric of America and our nonprofit sector that delivers it. For example, cuts to food assistance programs could cripple Meals on Wheels programs across the country that are largely grant funded. The chairman of the conservative House Freedom Caucus, Mark Meadows from North Carolina, said, “Meals on Wheels, even for some of us who are considered to be fiscal hawks, may be a bridge too far.”
Buried inside the details, there are small wins for the nonprofit sector. Funding for certain programs under Health and Human Services would see more investments (for example, Preparedness grants supporting public health, R&D for medical emergency countermeasures, and new block grant for states to support their own public health priorities).
Several key GOP constituencies will support portions of this budget proposal. Overall proposed funding reforms to Medicaid entitlements and the modern food stamp program SNAP will satisfy fiscal hawks. This is intended to be a shot across the bow to social programs across America. Before anyone panics, though, keep in mind this isn’t the typical budget process at work.
The Presidential budget request is simply a proposal that doesn’t have much teeth at all. After all, the founders gave Congress the power of the purse strings. Congress members will now start to develop their own Congressional Budget Resolution, which isn’t required to follow the prescribed path of the White House OMB.
There’s one part of this that’s interesting – the White House is talking the language of outcome metrics in this budget, but in a somewhat twisted way. They say, “We can do all of that and balance – because there’s a certain philosophy wrapped up in the budget, and that is that we are no longer going to measure compassion by the number of programs or the number of people on those programs. We’re going to measure compassion and success by the number of people we help get off of those programs and get back in charge of their own lives.”
Producing a balanced budget requires that the U.S. economy rapidly expands to annual 3 percent growth amid structural headwinds, like our aging population. Massive cuts to social programs, entitlements, and other discretionary spending essentially risks slowing cash transfers in an economy dependent on consumer spending. Promising massive tax breaks, and then solving budget and deficit problems using optimistic projections is a balancing act that seems destined to fall apart. I believe the White House OMB needs a real budget checkup here – hopefully Congress can provide that dose of reality later this year.
Fortunately, your organization’s budget process isn’t as complex as our country’s. Nevertheless, it’s always good to properly monitor, assess, and revise your budget. Here are best practices for your own “Budget Checkup.”