Office of Management and Budget Director Mick Mulvaney released President Donald Trump’s detailed budget on Tuesday.
The detailed budget, which expands on the skinny budget released in March, includes an increase in defense spending, domestic cuts and optimistic growth assumptions.
Mulvaney, who held an on-the-record, off-camera briefing on the FY18 budget on Monday afternoon, will testify Wednesday in front of the House Budget Committee and Thursday in front of the Senate Budget Committee.
“If I had a subtitle for this budget it would be the ‘taxpayer first’ budget,” Mulvaney said during the briefing. “This is I think the first time in a long time that an administration has written a budget through the eyes of the people that are actually paying the taxes.”
The budget includes a 10% increase in defense spending. This includes $639 billion for the Department of Defense, reversing the defense sequester and filling gaps in warfighting readiness. The budget also includes $44.1 billion for the Department of Homeland Security and $27.7 billion for the Department of Justice, including critical law enforcement, public safety and immigration enforcement programs and activities.
The budget includes $3.6 trillion in spending reductions, intending to reach balance within 10 years. This includes cuts of nearly $1 trillion over ten years in Medicaid, food stamps and other antipoverty programs.
According to Mulvaney, the major areas of savings are coming from the repeal of Obamacare, cuts to the food stamp programs and federal aid for student loans, and reform to the federal employee retirement programs.
“The repeal of Obamacare is the number one item. I want to say that was about $800 billion by itself,” Mulvaney said.
As Jeff Bush of The Washington Update points out, though, “it’s Congress that controls the purse strings.”
Any appropriated budget is going to require 60 votes from the Senate, Bush said.
“Which means that assuming you can hold all 52 Republicans together, you’re going to have to have eight Democrats to vote along with you,” Bush told ThinkAdvisor in a phone interview. “And there’s no way that Democrats are going to vote for those kinds of cuts to those departments.”
Bush called the president’s budget more of a guide post or wish list from the White House, adding that “it really does not mandate that Congress follows that.”
Bush expects the real budget debate will happen in September when Congress is trying to pass the appropriated budget.
“That’s when Democrats will have a lot to say about what ends up in that final budget,” Bush said. “I think it will look more like what budgets have looked like in the past of dollar-for-dollar increases. ‘Fine, Mr. Trump, we’ll give you X amount for defense, but we want X amount for domestic spending.’ I think that’s probably the model that we would anticipate seeing later this late summer.”
Bush says that’s the only path forward to get to 60 votes. The other option is to do anther continuing resolution, and Bush added that “that doesn’t serve anyone’s purpose, certainly not the American population.”
Mulvaney, who served on the U.S. House of Representatives from 2011 until he became Trump’s OMB director, knows how Congress often starts anew from the president’s budget proposal — and expects that.
“Do I expect them to adopt this 100% wholeheartedly without any change? Absolutely not,” Mulvaney said. “Do I expect them to work with the administration on trying to figure out areas where we’re on the same page? Absolutely. I don’t think it invalidates the importance of the credibility of the president’s budget just because they’re not going to pass it wholeheartedly.”
According to Mulvaney, the president’s budget profosal sends a message to Congress on what his priorities are, where he wants to spend more money or less money.
“One of the big ticket items is I want more money for defense,” Mulvaney said of the president’s priorities. “I want more money for border security. I want more money for the vets and school choice. And, I don’t want to add to the deficit this year. And I want to be responsible for the taxpayers in a way we haven’t been before.”
Here are the major highlights from the new budget that may interest financial advisors:
3% GDP Growth
The White House is projecting the GDP growth rate will rise to 3% by 2021, which is higher than the 1.9% forecast by the Congressional Budget Office.