Bipartisan Pushback Greets Trump's Proposed Budget

By Kate Davidson and Peter Nicholas Features Dow Jones Newswires

President Donald Trump proposed a $4.1 trillion spending blueprint Tuesday that amounts to a sweeping overhaul of the social safety net. It calls for deep cuts to programs such as Medicaid and food stamps, while projecting a big boost to economic growth that could be difficult to achieve.

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The budget would cut overall federal spending by $4.5 trillion over the next decade, more than offsetting a short-term boost in funding to the military, $200 billion on infrastructure investment and $19 billion on a new parental leave program.

It assumes tax cuts will boost economic growth enough to pay for themselves and raise enough additional revenue to eliminate the deficit in a decade.

The proposal is one of the clearest windows yet into Mr. Trump's values and priorities. But it is likely to face significant blowback on Capitol Hill, even among some Republicans, who have balked at cuts to foreign aid, farm subsidies and health care programs for low-income families.

The primary driver of savings in Mr. Trump's budget comes from more than $800 billion in cuts to Medicaid spending, despite a pledge from the president on the campaign trail not to touch the program.

Mr. Trump's budget director Mick Mulvaney said Monday much of the savings will come from changes in the GOP's health-care overhaul bill, which Mr. Trump supports. But the administration's budget would cut more than $600 billion from Medicaid and the federal Children's Health Insurance Program on top of the $250 billion saved from repealing and replacing the Affordable Care Act.

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The plan also assumes that economic growth that would reaching 3% by 2021 will help balance the budget within 10 years. Many economists have questioned whether the economy can grow much faster than its current pace without long-term investments in programs that boost worker productivity or help expand the labor force.

President Donald Trump faced swift resistance from Democrats and a range of Republicans on Capitol Hill on Tuesday after offering a 10-year plan to balance the federal budget that depends heavily on cuts to government safety-net programs and expectations of a big gain in economic growth.

The White House budget proposal for the 2018 fiscal year that begins Oct. 1 would cut federal spending by $4.5 trillion over 10 years. But it leaves mostly untouched the big entitlement programs -- Social Security and Medicare for retirees -- and proposes increases to infrastructure spending, a new parental leave program and a short-term boost to military spending.

With those priorities set -- in addition to the shared Republican goal of cutting taxes -- the White House offered up significant reductions in other spending programs to further the aim of reducing budget deficits. But the call for rolling back programs that touched their constituents made lawmakers bristle.

The proposal, which serves as a recommendation to Congress, is likely to be largely rewritten when lawmakers craft their own budget resolutions in the coming months.

"I hate to say it, but I would say the budget was dead before the ink was dry," Rep. Don Young (R., Alaska), who opposes the budget's elimination of two programs in his state.

Payments to Medicaid, the federal-state health program for the poor, would be cut by more than $600 billion over a decade from levels projected under current law in addition to proposed Medicaid cuts under the House bill repealing and replacing much of the Affordable Care Act.

The food-stamp program would be cut over 10 years by $193 billion, the student-loan program by $143 billion, disability payments by $72 billion and farm subsidies by $38 billion.

"The proposed cuts to some federal programs are not mere shavings; they are rather deep and harmful to my district spanning Kentucky's Appalachian region and other rural, impoverished parts of the country," Rep. Hal Rogers (R., Ky.), a former chairman of the House Appropriations Committee, said of the proposal.

Democrats blasted the overall budget proposal.

"This is the budget you write if you think working families have it too easy," Sen. Ron Wyden (D., Ore.) said.

Mr. Trump's budget risks alienating at least some of his core voters who rely on programs that he is proposing to cut. Rural white voters are among his staunchest supporters, the latest Wall Street Journal/NBC News poll shows. While the president's overall approval rating was 39%, 52% of rural voters said they approved of his performance.

The budget blueprint calls for scrapping two commissions important to Alaska, a state that Mr. Trump won by 15 points in the November election. The budget would eliminate the Denali Commission, which provides economic development services in Alaska, and an Essential Air Service program, which works to ensure that small communities offer some level of air service.

In all, nondefense spending as a share of the economy would fall to just 1.5% by the end of the next decade, well below the lowest level in records going back to 1962.

Besides wide-ranging spending reductions, the proposal depends on a projection that economic growth will reach 3% by 2021 and stay there through 2027, bolstering government revenue and holding down the need for support programs like unemployment insurance.

That growth projection is more aggressive than the Congressional Budget Office projection of 1.9% over a decade or the Fed's 1.8% projection. It also assumes the country's economic expansion, already nearly eight years old, won't be interrupted by another economic downturn.

The plan drew praise from some Republicans for proposing to balance the budget over 10 years and boosting military spending. GOP lawmakers have also backed overhauling federal funding for Medicaid in previous congressional budgets. Still, many balked at cuts to foreign aid, farm subsidies, health-care programs for low-income families and other programs that mattered back home.

"It's nothing new -- it's just a lot of people who don't know what the hell is going on in farm country," said Senate Agriculture Committee Chairman Pat Roberts (R., Kansas), who objected to proposed cuts for farm subsidies and new limits on crop insurance, as well as cuts to the Supplemental Nutrition Assistance program, also known as food stamps.

Sen. John McCain (R., Ariz.), chair of the Armed Services Committee, said the increase for the miliary was "a betrayal of the president's commitment to rebuild our military. It's way too low and will not restore our military from the draconian cuts that were the result of eight years of Barack Obama's failed leadership."

With Mr. Trump traveling through the Middle East and Europe, his deputies were left to defend the plan.

Mick Mulvaney, the president's budget director, said Monday the plan will boost economic growth by adding workers to the labor force, in part by requiring them to have jobs to qualify for assistance programs such as food stamps, in addition to funding a new parental-leave program.

The 2018 budget blueprint is especially important this year because Republicans plan to use it as a vehicle to advance an overhaul of the tax code. The party, which has 52 seats in the Senate, will need to hold together most of its coalition to proceed, but party fractures became apparent with the budget proposal.

House Freedom Caucus Chairman Mark Meadows praised the Trump budget's proposed cuts. But the North Carolina Republican said he was given pause by the budget's cuts to community programs that help fund Meals on Wheels, which provides free food service daily to homebound individuals.

"Meals on Wheels, even for some of us who are considered to be fiscal hawks, may be a bridge too far," said Mr. Meadows, noting that he himself has delivered meals.

Deficit hawks also took swipes at the plan, arguing it does virtually nothing to address the two biggest drivers of government spending: Medicare and Social Security.

"This is not sustainable over the long-run because Social Security and Medicare costs will continue growing rapidly even after lawmakers have run out of other offsets," said Brian Riedl, a senior fellow at the Manhattan Institute and former chief economist for Sen. Rob Portman (R., Ohio).

Despite the resistance he will surely face, the president has important allies in Congress; most notably House and Senate leadership with a mutual incentive to ensure the Republican economic agenda doesn't stall in Congress.

"We finally have a president who is willing to actually balance the budget," said House Speaker Paul Ryan. Echoing the president's promise, he said, "clearly getting to regulatory reform and tax reform will help us grow the economy."

Senate Majority Leader Mitch McConnell (R., Ky.) said the budget reflected "recommendations" from Mr. Trump that Republicans would take into consideration as they write their own budgets. "We'll be taking into account what the president recommended. They will not be determinative," he said.

Moreover, it's by no means clear that Trump voters themselves will abandon him even if they dislike pieces of his budget plan.

"It takes a helluva lot to move Trump supporters away from Donald Trump, as we've seen," said Neil Newhouse, a GOP pollster. "So I don't think a preliminary budget proposal will do the trick."

--Peter Nicholas contributed to this article.

Write to Kate Davidson at kate.davidson@wsj.com, Kristina Peterson at kristina.peterson@wsj.com and Natalie Andrews at Natalie.Andrews@wsj.com

(END) Dow Jones Newswires

May 23, 2017 19:44 ET (23:44 GMT)