WASHINGTON – President Trump’s $4.1 trillion budget request for fiscal 2018, as expected, seeks to boost funding for defense and cut funds for many discretionary non-defense programs like Medicaid, while also eliminating popular community and transportation grant programs. It is drawing complaints from Democrats and state and local groups as well as infrastructure advocates who say it actually cuts net funds for infrastructure.
The proposed budget, called A New Foundation for American Greatness, directs agencies to devote more money to “mission achievement rather than costly, unproductive compliance activities.”
The budget request does not contain any specific tax proposals. It simply repeats, with less detail, the administration’s one-page framework for tax reform released a few weeks ago. It says that “business tax reform” should “eliminate most special interest tax breaks to make the tax code more equitable, more efficient, and to help pay for lower business tax rates.”
“You won’t see any more detail on this than we already have,” Office of Management and Budget director Mick Mulvaney told reporters on Sunday, referring to tax reform. He said the budget assumes the tax plan will be deficit-neutral.
The budget request includes $200 billion of outlays over 10 years to support President Trump’s proposed $1 trillion in private/public infrastructure investment. The infrastructure funding would begin at $5 billion in fiscal 2018, rising to $25 billion in fiscal 2019, $40 billion in 2020, and a peak of $50 billion in fiscal 2021, before declining back to $5 billion per year in each of fiscal years 2025 and 2026.
“The impact of this investment will be will be amplified with other administrative and regulatory actions the administration plans to pursue,” OMB said it in a budget document. “The president’s target of $1 trillion will be met with a combination of new federal funding, incentivized non-federal funding and expedited projects that would not have happened but for the administration’s involvement,” OMB said, citing the Keystone XL Pipeline as an example of the latter.
“The administration continues to work with the Congress, states, localities and other infrastructure stakeholders to finalize the suite of direct federal programs that will support this effort,” OMB said.
Mulvaney told reporters that most of the infrastructure funding is included in the budgets for fiscal years 2019, 2020, and 2021 because “It’s not possible to spend it all in one year, so we will allow for a ramp-up.”
The budget proposal includes $2.6 billion for a wall on the U.S.-Mexico border. "The spending on the border security is $2.6 billion, of which I think $1.6 billion is actual bricks-and-mortar construction," Mulvaney told reporters. "The other $1 billion is infrastructure and technology."
The 2018 funding is much less than the $8 billion to $12 billion that most think would be needed to build 30-ft high wall.
But Senate Minority Leader Chuck Schumer, D-N.Y. said the numbers are a disappointment to infrastructure advocates. “Despite President Trump’s repeated promises to rebuild roads, bridges, airports and other infrastructure, the budget proposal the administration released today is actually a net cut to infrastructure spending,” Schumer said, “His $200 billion infrastructure funding proposal is wiped out by over $200 billion in existing infrastructure investment cuts and an additional $140 billion in baseline spending shortfalls, which could result in an overall decrease of $145 billion in infrastructure spending over the next 10 years.”
The budget request is generally consistent with the “skinny budget” blueprint issued by OMB in March. Mulvaney called it a “taxpayer-first budget” that eliminates federal programs that force taxpayers to pay for those who don’t work or are undeservedly getting disability payments. He said the budget balances itself in 10 years.
The budget proposes to reform Medicaid by giving states the choice between federal funding on a per capita basis or a block grant. State and local governments have argued this will slash federal funding. Budget documents say it will "save" $610 billion over 10 years and give states "more flexibility to control costs and design ... solutions.".
The budget request proposes discretionary funding for the Transportation Department of $16.2 billion, down $2.4 billion or13% from fiscal 2017.
It would eliminate the popular Transportation Investment Generating Economic Recovery (TIGER) grants, a stimulus-era program that must be authorized each year in appropriations measures. TIGER grants in fiscal 2017 totaled $499 million and are sometimes used in conjunction with bonds. Projects funded with TIGER grants “are generally eligible for funding under existing surface transportation formula programs,” OMB said in budget documents.
The budget also would halt expenditures from the Federal Transit Administration’s New Starts capital investment grants to agencies that have not signed a full funding agreement. “Future investments in new transit projects would be funded by the localities that use and benefit from these localized projects,” the budget document stated.
However, the plan includes the $45 billion of federal highway and $12.2 billion of transit funding provided in fiscal 2018 by the Fixing America’s Surface Transportation (FAST) Act.
It also retains the Nationally Significant Freight and Highway Projects grant program authorized by the FAST Act of 2015 for large highway and multimodal freight projects with demonstrable national or regional benefits. The freight grant program is authorized by the FAST Act at an average of $900 million per year through 2020.
The budget would eliminate funding for the Community Development Block Grant program, which provides grants for a range of programs including those focused on anti-poverty, infrastructure and other needs. “The federal government has spent over $150 billion on this block grant since its inception in 1974, but the program is not well-targeted to the poorest populations and has not demonstrated results, OMB said, adding the “budget devolves community and economic development activities to the state and local level and redirects federal resources to other activities.”
But the budget would provide $2.3 billion for state water revolving funds, a $4 million increase over the 2017 level, and $20 million for the Water Infrastructure Finance and Innovation Act’s (WIFIA’s) low-cost credit subsidy program, which can be used in conjunction with tax-exempt bonds. OMB said the $20 million WIFIA credit subsidy “could potentially support $1 billion in direct federal loans.”
House Speaker Paul Ryan, R-Wi., praised the budget, saying, “We can finally turn the page on the Obama era of bloated budgets that never balance. President Trump has proven his commitment to fiscal responsibility with a budget that will grow the economy.”
Some Republicans were less than enthused. “I’ve never seen a president’s budget proposal not revised substantially, said Sen. Chuck Grassley, R-Iowa. “I’ll carefully scrutinize and assesses priorities as the president has with his proposal and, as always, work on behalf of Iowans.”
But Democrats, state and local groups and transportation advocates blasted Trump’s proposals. Sen. Chris Van Hollen, D-Md., said the budget proposal “screams, ‘Millionaires First, Working People Last,’” adding, “it afflicts the vulnerable and comforts the powerful.”
“President Trump claimed he wanted to rebuild our infrastructure, but his budget takes a wrecking ball to vital transportation projects like [Maryland’s] Purple Line,” Van Hollen said. “And his claim that [the budget] will balance in 10 years is delusional.”
“This is a budget designed to inflict pain on the very people that make up the backbone of this country,” said Rep. Richard Neal from Massachusetts, the top Democrat on the House Ways and Means Committee.
“It punts the ball on Highway Trust Fund solvency after the FAST Act expires in 2020,” said Jeff Davis, a senior fellow at the Eno Center for Transportation. “Assumptions in the budget would reduce HTF expenditures by $95 billion between fiscal 2021 and 2027, after the general fund transfers that kept the fund afloat through fiscal 2020 run out,” Davis said. “So $200 billion minus $95 billion is only $105 billion in real infrastructure money and that does not even take into account their proposed mass transit infrastructure cuts on the discretionary side of the budget.”
“We are greatly concerned that this proposed budget essentially abdicates the federal role in the federal-state-local intergovernmental partnership that is essential to addressing our nation’s most pressing challenges,” said National Association of Counties’ executive director Matthew Chase. “This budget, if enacted, would deal devastating blows to some of the most vulnerable people in our communities.
“The scale of these proposed cuts would far outpace the ability of state and local governments to backfill, from disaster mitigation to infrastructure upgrades to assistance for the working poor, elderly and children,” said Chase.