The Trump administration released its second budget proposal on Monday, and as prior reports indicated, it abandons the long-held GOP position, as well as the explicit promise President Trump made, to balance the federal budget within 10 years.
The budget would cut spending, but not nearly enough to balance the budget within the traditional 10-year budget window. The proposal would add $7.2 trillion more to the debt over 10 years. The projections in the budget also envision very robust economic growth, so if the economy cools, the budgetary picture will get even worse.
All of this is made more difficult by the trillion-dollar hole left in the budget by Trump’s tax cut, plus the half a trillion in increased spending in the two-year budget deal Trump signed last week. That deal means $1 trillion in annual budget deficits for the foreseeable future.
This is far from what candidate Trump told his supporters he would do:
- In his official campaign launch address, Trump promised to “reduce our $18 trillion in debt,” which will not happen even under the administration’s rosy projections.
- On the campaign trail, Trump said he would “freeze the budget,” which has certainly not happened.
- Shortly before his inauguration, he told Sean Hannity that he would “balance the budget very quickly … I think over a five-year period. And I don’t know, maybe I could even surprise you.”
- Previous to that, in March 2016, he told Bob Woodward that he could get rid of the debt “fairly quickly.” When pressed, he said, “Well, I would say over a period of eight years.”
- Trump asserted during the second presidential debate that he would bring back energy companies, which would make so much money that they could pay off the national debt.
Those promises are also counter to Republican orthodoxy — the 2011 shutdown, for example, effectively boiled down to the Republican congressional majority’s demand for an amendment to the Constitution that would require a balanced budget. Now, that demand has all but disappeared.
Trump has apparently given up on even talking about these issues: during his first State of the Union address, the president failed to mention the budget, debt, or fiscal deficit at all. His prior joint address to Congress had one attack on the Obama administration for the debt it had accumulated, plus a brief mention of his budget proposal, but no talk of cutting the deficit or shrinking the debt.
Last year, Trump’s budget director, Mick Mulvaney, dismissed his boss’ budget promises as “hyperbole.”
“I’m not going to be able to pay off $20 trillion worth of debt in four years,” he said at the time. “I’d be being dishonest with you if I said that I could. The reason the president doesn’t want to change some of the mandatory spending, is because the public’s not ready for it yet. They’re ready for economic growth.”
The budget proposal still manages to implement austere cuts to many agencies, with the exceptions of the Departments of Defense, Veterans Affairs, and Homeland Security, similar to last year’s budget proposal.
The Trump administration has seemingly been overwhelmed by how difficult it is to balance the federal budget while also lowering taxes, preserving non-discretionary spending, increasing military spending, and cutting discretionary spending.
The market’s excitement about tax cuts, which helped buoy stock prices to record levels, may be a double-edged sword: high deficits caused by those same tax cuts, plus an administration with a budget that plans to keep those deficits for at least 10 years, brings anxiety to the stock market. Mulvaney himself warned on Sunday that because of the still-rising deficit, interest rates may “spike.”
All of this may come down to the fact that the president simply cannot grasp how any of this works. Based on his comments to Sean Hannity last year, for instance, it was unclear whether Trump understood the national debt: he touted the growth in the stock market, and accused the last administration of borrowing $10.2 trillion, “and yet, we picked up $5.2 trillion in the stock market, possibly picked up the whole things in terms of the first nine months in terms of value.”
He concluded, “so, you could say in one sense we are really increasing values, and maybe in a sense we are reducing debt.”
The performance of the stock market is unrelated to the national debt.
In 2016, then-Fox News host Bill O’Reilly pushed Trump on how hard it would be to cut taxes and use any revenue gained from growth to cut down on the debt. “…You are going to have to raise taxes to get more money in to pay down that debt,” O’Reilly said. Trump replied that taxes are too high. O’Reilly argued that “But if you cut the taxes again the revenue to pay down the debt then leaves.” He then pivoted to another topic, but not before Trump said “You are going to slowly pay down the debt.”