Health Law Daily $3.6T in cuts spells R-E-S-P-E-C-T in Trump budget
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Tuesday, May 23, 2017

$3.6T in cuts spells R-E-S-P-E-C-T in Trump budget

By Anthony H. Nguyen, J.D.

The President is seeking $4.1 trillion for fiscal year (FY) 2018 to be allocated among various areas with notable increases on defense and border security spending in his inaugural budget. Additional funding would be provided for infrastructure initiatives to spur additional private sector investments in infrastructure spending. Cuts would be made to certain safety net and other domestic programs such as Medicaid, student loans, and scientific research.

The Trump Administration’s inaugural budget "A New Foundation for American Greatness" estimates that overall spending would be reduced by $3.6 trillion over the next 10 years. In addition, the budget claims to eliminate federal deficits in 10 years while keeping the President’s campaign promises of delivering tax cuts while maintaining federal revenue levels.

In a brief description of the proposed budget, the President noted that it showed "respect for the people who pay the bills." Highlighting previous administrations’ spending trends that led to massive federal debt, he noted, the proposed budgets "combination of regulatory, tax, and welfare reforms will provide opportunities for economic growth and creation."

Domestic programs. Programs intended to help low-income and disabled Americans, including Social Security disability insurance benefits or public assistance for needy families, would face cuts under the proposed budget. Some of these reductions would come from tightening eligibility requirements or additional incentives to work.

The President’s budget does not propose cutting funding for Medicare or "core" Social Security benefits. However, the budget does include substantial cuts to federal funding for Medicaid over the decade. These cuts stem in part from assumptions that the House-passed American Health Care Act (AHCA) to repeal the Affordable Care Act (ACA) will be enacted without any changes from the Senate (see The AHCA strikes back, May 4, 2017).

Medicaid would see some of the biggest cuts with over $600 billion cut over 10 years and an addition $800 billion during the same time frame if the AHCA passes as-is through the Senate. The AHCA would turn Medicaid into a block grant or per capita program for states, which could mean reduced benefits, lost coverage or both. The AHCA also phases out the federal money for the expansion of Medicaid that was in the ACA. Under the President’s proposed budget, the Children’s Health Insurance Program (CHIP) would also see substantial cuts as well over the 10-year period.

Assumptions. However, the White House arrives at those projections in part by using assumptions that few economists or policy experts have considered realistic. Trump's economic and budget teams assume a higher economic growth rate than others, specifically economic growth of 3 percent per year over the next decade. The economy has not grown more than 2 percent in a year since 2009. The budget proposal also assumes that tax reform will not add to deficits.

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