May 24, 2017 President Trump's FY 2018 Budget cuts trillions from Medicaid, other programs over 10 years Austere spending blueprint provides few details on tax reform President Trump's $4.094 trillion FY 2018 Budget blueprint, released Tuesday, May 23, proposes to balance the budget over 10 years, spending generously on defense and infrastructure while shielding Medicare and Social Security from cuts. As such, the Budget proposes cutting substantially — $1.7 trillion over 10 years — from social and entitlement programs for low-income Americans, such as Medicaid and food stamps. The Budget adopts all of the Medicaid reforms outlined in the House-passed American Health Care Act (HR 1628), which would repeal and replace elements of the 2010 Affordable Care Act, while layering on additional cuts to Medicaid, the health insurance program for low-income people. To get to balance, the plan also relies on the optimistic assumption that economic growth will accelerate to 3% by 2021. The Administration has posted all of its major budget documents at this page. The Budget offers few specific details about the Administration's plans for tax reform, calling generally for lower rates on individuals and businesses. Mick Mulvaney, Director of the Office of Management and Budget (OMB), on May 22 said that lower taxes would be key to jump-starting the economic growth rate, but when asked for more specifics on tax reform, he said, "You won't see any more detail in this [budget] than you already have. We've released our principles, we sent them to the Hill, the discussions are ongoing." The Budget document, "A New Foundation for American Greatness," proposes cutting spending by $3.6 trillion over 10 years, representing a dramatic pull-back in federal support for a number of "safety net" programs. The blueprint would cut $274 billion over 10 years to anti-poverty programs, including cutting $193 billion from food stamps by requiring able-bodied people to work in order to participate and mandating that states must eventually match federal funding. The Budget cuts $800 billion from Medicaid over 10 years, as well as $10.6 billion from federal education programs over that span. The Budget also restricts eligibility for the earned-income tax credit (EITC) and the child tax credit, cutting $40 billion over 10 years by requiring those who use the credits to have Social Security numbers. Other areas that would see substantial cuts over the 10-year window include federal student loans (cut by $143 billion); disability insurance ($72 billion); retirement benefits for federal employees ($63 billion) and farm subsidies ($38 billion). In general, the Budget would impose a 2% cut to all discretionary spending each year for 10 years, except for defense programs. "There's a certain philosophy wrapped up in the budget," Mulvaney said. "And that is we are no longer going to measure compassion by the number of programs and the number of people on those programs. We're going to measure compassion and success by the number of people we helped get off those programs and get back in charge of their own lives." The FY 2018 Budget proposes increases for a couple of areas, however. It calls for a short-term increase in defense spending; $2.6 billion for border security (including $1.6 billion to begin construction of a wall on the southern border); $200 billion for infrastructure projects; and $19 billion for a new program, championed by Ivanka Trump, that would provide new parents with six weeks of paid leave. Reaction. Rep. Mark Meadows (R-NC), chairman of the House Freedom Caucus, called the blueprint "probably is the most conservative budget that we've had under a Republican or Democrat administration in decades." House Speaker Paul Ryan (R-WI) said he was pleased that "we finally have a president who's willing to actually even balance the budget. Clearly Congress will take that budget and then work on our own budget, which is the case every single year, but at least we now have common objectives … and we will have a great debate about the details and how to achieve those goals." Senate Majority Whip John Cornyn (R-TX) said, "Almost every budget I know of is basically dead on arrival, including President Obama's … I think [this budget] may find a similar fate, but obviously it's an expression of [President Trump's] priorities, which is important in terms of the conversation between the branches." Senate Minority Leader Charles Schumer (D-NY) expressed alarm at the depth of the proposed cuts, saying, "This would pull the rug out from so many Americans who need help: those suffering from opioid and heroin addiction, people in nursing homes and their families who care for them, the elderly, the disabled and children." Tax The Budget assumes deficit-neutral tax reform and said the Administration will work closely with the Congress to enact it, noting that several core principles have already been articulated. In addition to an unspecified lowering of rates for individuals, the Budget calls for protecting homeownership, charitable giving and retirement saving, as well as helping families struggling with child and dependent care expenses. It also calls for repeal of "the 3.8% Obamacare surcharge on capital gains and dividends, which further hinders capital formation." The Budget calls for reducing the tax rate on US businesses in order to fuel job creation and economic growth, and eliminating most "special interest tax breaks." It also calls for transitioning to a territorial system with a one-time repatriation tax on already accumulated foreign income. "Going forward, the President is committed to continue working with the Congress and other stakeholders to carefully and deliberatively build on these principles to create a tax system that is fair, simple, and efficient — one that puts Americans back to work and puts America first," the Budget states. Health care The Budget presumes $250 billion in savings over 10 years through enactment of the House-passed repeal-and-replace bill for the 2010 Affordable Care Act, which are mostly achieved by converting Medicaid's formula to a per capita allotment and effectively eliminating the ACA's Medicaid expansion. As in the American Health Care Act (HR 1628), the Budget contemplates allowing states to choose a per-capita cap on federal Medicaid funds or a block grant structure that would provide more flexibility in how the money is used. The Children's Health Insurance Program (CHIP) would be cut by about 20% in fiscal 2018, instead of a scheduled 23% increase, to force the program to focus on the neediest children, which produces $6 billion in savings. In addition to the Medicaid cuts in HR 1628 included in the Budget, the blueprint also envisions saving $610 billion more in Medicaid over 10 years by further reducing the program's growth rate and giving states more flexibility. All told, the Budget proposes a total of $1.4 trillion in cuts to Medicaid funding over 10 years. New work requirements for the Supplemental Nutrition Assistance Program (SNAP, the food stamps program), together with a requirement that states match federal funding for SNAP, would save $193 billion over 10 years. The Budget also would eliminate the Independent Payment Advisory Board (IPAB) created by the Affordable Care Act and save $55 billion from health programs by making medical liability reforms. The Budget proposes to cut about $5.8 billion from the National Institutes of Health, partly by consolidating the activities of the Agency for Healthcare Research and Quality (AHRQ) within NIH and eliminating the Fogarty International Center. The Budget also makes $400 million in cuts over 10 years to the Substance Abuse and Mental Health Services Administration, and zeroes out federal funding for Planned Parenthood altogether. The Budget includes a package of administrative actions intended to promote regulatory efficiency and speed the development of medical products. These include encouraging the use of 21st Century Cures Act tools for drug evaluation, review, and approval; simplifying administrative requirements to reduce the reporting burden on drug and device manufacturers; and clarifying the treatment of value-based purchasing arrangements, which reward high-performing health care providers. The Budget also proposes to improve "predictability for payers" by fostering the exchange of information between manufacturers and payers' pre-approval, "to reduce uncertainty and improve payer ability to more accurately set premiums." Infrastructure and transportation The FY 2018 Budget proposal highlights the president's "Infrastructure Plan" to support $1 trillion in private/public infrastructure investment, and includes $200 billion in unspecified outlays (over 10 years). However, the Budget also proposes a $2.4 billion decrease (13%) from the FY 2017 funding levels for the Department of Transportation, including re-proposing cuts in infrastructure grant programs that were rejected by Congress in the FY 2017 omnibus. While the formal budget documents submitted to Congress provide sparse detail on the Infrastructure Plan, a separately issued White House "Fact Sheet" elaborates on the Administration's views on funding proposals, federal "cash budgeting," and environmental review and permitting enhancements (see attached PDF). The FY 2018 Budget states that 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 (for example, the Keystone XL Pipeline)." In addition, the Administration will pursue "administrative, regulatory, and legislative changes" to streamline the "burdensome permitting process" for infrastructure projects. The Trump Administration's priorities for direct federal spending "will be focused on incentivizing additional non-federal investments." The Administration pledges to work with infrastructure stakeholders to "finalize the suite of direct federal programs" to allocate $200 billion in outlays related to the infrastructure initiative. The Budget's proposed schedule for infrastructure spending is: $5 billion in FY 2018, $25 billion in FY 2019, $40 billion in FY 2020, and $50 billion in FY 2021 with outlays decreasing annually thereafter to $5 billion in FY 2027. Major infrastructure savings and reforms — Federal Aviation Administration's (FAA) air traffic control — Functions would be transferred to an independent, non-governmental organization beginning in FY 2021 to reduce discretionary spending by $72.8 billion and aviation excise taxes by $115.6 billion. — Federal Transit Administration's Capital Investment Program (New Starts) — Funding would be reduced from $2.16 billion in FY 2017 to $1.232 billion, a $928 million decrease; limited to projects with existing full funding grant agreements. — Grants to Amtrak — Grants would be reduced from $1.404 billion in FY 2017 to $774 million in FY 2018, a $630 million decrease; funding for Long Distance services would be terminated. — National Infrastructure Investments (TIGER) — Funding would be reduced from $499 million in FY 2017 to zero in FY 2018; the Budget says these projects do not rise to the level of national or regional significance. — Power Marketing Administration (PMA) Asset Divestiture — Divesting the transmission assets of the PMAs, including Southwestern (SWPA), Western Area (WAPA) and Bonneville (BPA, would generate $5.512 billion in revenue over 10 years; Budget says ownership of transmission assets is best carried out by the private sector. Infrastructure priorities The following are "illustrative examples" of funding proposals that "will be pursued by the Administration as part of the Infrastructure Initiative," according to a fact sheet provided by the White House: — Expand the Transportation Infrastructure Finance and Innovation Act (TIFIA) Program — The Administration also supports the expansion of TIFIA eligibility. — Lift the cap on private activity bonds and expand eligibility to other non-federal public infrastructure — The Administration also supports the expansion of PAB eligibility. — Incentivize innovative approaches to congestion mitigation -Competitive grants would be provided to urbanized areas using the Congestion Reduction Demonstration Program as a model. — Liberalize tolling policy and allow private investment in rest areas — Restrictions on tolling on interstate highways that prevents private investment would be reduced. — Fund the Water Infrastructure Finance and Innovation Act (WIFIA) program — EPA's new program can leverage private investments in large drinking-water and wastewater infrastructure projects. — Encourage the Use of Army Corps of Engineers (Corps) Contributed/Advanced Funding Authorities — Non-federal sponsors would be allowed to fund construction activities that do not receive Federal funding. The Budget's infrastructure provisions prompted criticism from Rep. Peter DeFazio (D-OR), who said the Budget "pretends to increase infrastructure investments by $200 billion, but that is a sham — it provides just $5 billion in infrastructure investment in FY 2018. The '$200 billion investment' is a 10-year figure with zero details about how or where that money is spent." Energy and environment The Trump Administration's priorities for energy and environmental policies represent a 180-degree turnabout from the clean energy focus pursued during the eight years of the Obama administration. The FY 2018 Budget proposes to cut the Department of Energy's (DOE) funding by 9.1% to $28 billion. Many of the proposed cuts to DOE's budget are to renewable energy-related programs that enjoy broad bipartisan support. The bulk of the proposed cuts would be focused on DOE's four applied energy research and development (R&D) program areas: Energy Efficiency and Renewable Energy (a cut of almost 60%), Fossil Energy (50%), Nuclear Energy (30%), and Electricity Delivery and Energy Reliability (over 30%). The Budget proposal asserts that federal energy research activities should be focused on early-stage R&D, and that the private sector should be relied upon to fund later-stage R&D, including demonstration, commercialization and deployment of new technologies. The FY 2018 Budget proposes to completely eliminate the Advanced Research Project Agency-Energy (ARPA-E) program, once again on the assumption that the private sector is better positioned to finance disruptive energy technology research and development. The Title XVII Innovative Technology Loan Guarantee Program and the Advanced Technology Vehicle Manufacturing Loan Program — vestiges of the 2009 American Recovery and Reinvestment Act (the Recovery Act) — also would be eliminated and all remaining loan authority for the two programs would be rescinded. In keeping with the Budget's focus on relying on the private sector, the Administration proposes to divest all of the transmission assets owned by of the Power Marketing Administrations (PMAs), including the Southwestern Power Administration (SWPA), Western Area Power Administration (WAPA) and Bonneville Power Administration (BPA). In addition, the Budget proposes to repeal WAPA's authority to borrow up to $3.25 billion in emergency funds authorized by the Recovery Act for the purpose of constructing and/or funding projects within WAPA's service territory that deliver, or facilitate the delivery of, power generated by renewable energy resources. The Budget also calls for opening up the Arctic National Wildlife Refuge for oil drilling and halting oil and gas revenue sharing payments to states along the Gulf Coast. It proposes to sell approximately 270 million barrels of Strategic Petroleum Reserve (SPR) crude oil while closing two of the four SPR sites by 2027. The Administration argues that the SPR was a product of the 1970s, when the United States was importing 5-6 million barrels of oil per day and oil prices were controlled by OPEC. Under current and projected oil price conditions, imports are projected to decline to less than 2 million barrels a day by 2027 and the Budget argues that the SPR is no longer necessary as a hedge against oil price shocks. The Environmental Protection Agency (EPA) would take an even harder hit under the FY 2018 Budget, which calls for EPA to be funded at $5.7 billion, a more than 31% cut from FY 2017 levels. The Administration wants to focus and prioritize EPA's environment activities on core functions that are required by federal environment laws. Among other things, the Budget proposes to slash or eliminate categorical grants used to help fund state environmental program offices and activities. The Budget also proposes to eliminate funding for Energy Star and several other voluntary partnership programs related to energy and climate change, which the Administration argues are not essential to EPA's core mission and can be implemented by the private sector. Funding would also be cut for EPA's environmental enforcement activities, placing a greater burden on the states to enforce environment laws. Reductions are also proposed for EPA's Office of Research and Development, and the Hazardous Substance Superfund Account to better focus on "reining in Superfund administrative costs and promoting efficiencies." Financial services Among the financial regulators, the Budget proposes to cut funding for the Treasury Department by 4.1%, or $519 million, in FY 2018. Funding for the Securities and Exchange Commission would stay level at $1.6 billion, as would the budget of the Commodity Futures Trading Commission ($250 million). The SEC, however, would have to use its reserve fund to supplement its budget. That fund, perennially unpopular with congressional Republicans, is funded through registration fees, so the Administration sees a $50 million savings by incorporating the reserve fund into the agency's budget. The CFTC, for its part, announced May 23 that it will seek a $31.5 million increase for FY 2018, regardless of the Administration's budget. Regulatory reform. The Budget includes non-specific language saying $35 billion in savings can be achieved over 10 years by avoiding taxpayer bailouts and "burdensome regulations" that hinder innovation. The bailout language refers to a proposal by congressional Republicans to repeal the Dodd-Frank Act's "orderly liquidation authority," which allows the FDIC to draw upon a line of credit from Treasury in order to safely wind down a large, failing bank that would not be able to secure liquidity from other lenders. CFPB. The Budget would restructure the Consumer Financial Protection Bureau into a smaller agency that is funded through appropriations and no longer through a portion of the Federal Reserve's budget, allowing a savings of $145 million in FY 2018 and $6.8 billion over 10 years. The Budget proposes to "limit CFPB's funding in 2018 to allow for an efficient transition period and bring a newly streamlined agency into the regular appropriations process beginning in 2019." Flood insurance. The Budget proposes to save $95 million in FY 2018 (and $8.9 billion over 10 years) through reforms to the National Flood Insurance Program. The Administration has said that funding the NFIP through "selected user fees" would "ensure that the cost of government services is not subsidized by taxpayers who do not directly benefit from those programs." Student loans. The Budget finds considerable savings among federal student loan programs, by eliminating or consolidating benefits now available to borrowers. A key proposal would consolidate all of the government's income-based repayment programs into a single plan. Undergraduate students' monthly payments would be capped at 12.5% of their discretionary income and any remaining amounts could be forgiven after 15 years of payments (30 years for graduate students). The proposed repayment plan changes would save more $76 billion over 10 years. The Budget would also eliminate a monthly maintenance fee paid to guaranty agencies, which insure private lenders against default. Ex-Im Bank. The Budget would cut the amount that the Export-Import Bank could spend on administrative overhead and salaries by $10 million, and cancel the bank's $165 million Tied Aid Fund. Pensions / Retirement The Budget would shift the cost of federal employee contributions to the Federal Employees Retirement System (FERS). The Administration proses to "equalize" employee and employer contributions, so that workers would bear half the normal cost of the defined-benefit plan. The increased employee contributions would be phased in over several years and produce an estimated $72 billion in savings over 10 years. The Budget also includes a proposal to impose a variable-rate premium (VRP) and an exit premium on multiemployer pension plans. The VRP would be based on a plan's level of underfunding, premiums would be indexed to inflation, and additional increases would take effect in 2022 and 2027. The Budget would also impose an "exit premium," equal to 10 times the flat rate premium, on employers that withdraw from a multiemployer plan. The exit premium would be in addition to the current withdrawal liability payment. These proposals would raise a total of $20.9 billion over 10 years. ———————————————
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Budget blueprint
Budget fact sheet
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