Trumponomics 101: Good Riddance to Eight Years of Obama Budget Chaos
President Trump has inherited a national debt of nearly $20 trillion and a deficit projected to rise rapidly over the next decade. Working through the nation’s fiscal mess won’t be easy, but it will be necessary if he and Congress hope to unleash economic growth and secure the blessings of economic opportunity and prosperity for current and future generations.
What’s needed is a new era of fiscal responsibility and spending control. Assuring America’s investors, both foreign and domestic, that the country has a concrete strategy to stop out-of-control spending and debt will enhance confidence and encourage investments in the U.S. economy and jobs.
Any tax relief Congress and the president can deliver this year will be short-lived in the absence of consequent spending controls that bring spending and revenues into closer alignment. Out-of-control spending and debt threaten higher future taxes as interest costs rise to consume an unsustainable share of the budget.
Current Congressional Budget Office projections show interest payments growing to $768 billion by the end of the decade. The prospect of having to spend more on debt service than on national defense would deeply trouble any commander-in-chief.
The budget process is a key tool that is used to control spend and debt. The president kicks off the budget process by presenting his vision to Congress every spring. Congress then follows with its own plan, encompassing all spending and taxes in one concurrent budget resolution. After the House and Senate agree on a plan, that budget can kick off reconciliation, a powerful tool to write implementing legislation that carries out the goals set in the budget. Simultaneously, appropriators begin drafting spending bills to allocate funds for defense and nondefense discretionary programs as well as certain other appropriations.
At least, that’s how the process is supposed to work. But it does not always operate smoothly. In fact, most years Congress and the president rely on one shortcut or another, such as a continuing resolution or omnibus spending package, to fund federal government operations. Regardless, legislators have all the tools in their arsenal to make important budget reforms, as long as they are willing to use them.
President Trump’s first budget plays a key role in this process. Reports indicate that he will deliver it in two parts. First, he will release a so-called skinny budget in mid-March. This submission will focus on the one-third of the budget for which Congress appropriates funding every year, called discretionary spending. Then, the president is expected to issue his first full budget in May. In addition to discretionary spending, the full budget will include mandatory spending (the so-called entitlement programs) as well as a tax plan and other policy proposals.
The skinny budget, we learned, will reprioritize defense spending and reverse eight years of Obama-era shifts in spending from a core constitutional priority toward the president’s domestic pet projects. That’s encouraging, especially if all of the increase is offset with immediate spending reductions in nonessential domestic programs.
My Heritage Foundation colleagues and I have identified more than $80 billion in domestic discretionary cuts that could be made right away. Our congressional budget proposal lays out in great detail where and how those cuts can be made.
Net cuts in discretionary spending are critical to reducing the size and scope of the government and enhancing individual and economic freedom. They also make an important down payment toward the federal deficit and debt.
Smart cuts can “drain the swamp” by weaning special interests from feeding unfairly from the federal trough. They can also streamline the bloated federal bureaucracy and empower the private sector—as well as states and localities—to absorb functions the federal government has improperly usurped.
This approach will unleash innovation, economic growth and jobs that have been hindered by an overreaching federal bureaucracy. Much good can come from rightsizing the federal government and reviving federalism, if properly conceived.
Success in controlling federal spending and debt, however, depends heavily on reforms to federal health care programs and social security. These programs already consume more than half of the annual federal budget, and they are growing rapidly.
Without reforms, nearly 85 cents of every additional dollar in spending over the next ten years will go to federal health care programs, social security and interest on the debt. This is why entitlement reform must follow closely behind efforts to streamline the federal bureaucracy.
It’s quite smart to focus on attainable, meaningful goals early in a new presidency. If President Trump and Congress can show the American people that they are serious about reining in federal agency overreach and cutting programs that cater to special interests, perhaps they can build trust with the American people to tackle the bigger fiscal challenges.
Romina Boccia is deputy director of the Roe Institute for Economic Policy Studies and Grover M. Hermann Research Fellow in Federal Budgetary Affairs at the Heritage Foundation.
Image: Donald Trump at a campaign rally in Prescott Valley, Arizona. Flickr/Creative Commons/Gage Skidmore