Proposed Budget Released

Last week President Trump released his budget proposal for discretionary spending (deficit projections and the budget projections for entitlement programs are released later and they actually make up over 70% of the federal budget, but I digress). One thing you have to say about Donald Trump is that he is not a man of half measures and his first budget is no exception.

The proposed budget increases defense spending by $54 billion and has cuts in other places of roughly the same amount, which seems to indicate that Trump intends to bring down the huge federal spending deficits by simply freezing spending, rather than increasing it every year as has been the case almost routinely.

Before we get into some of the details, let’s remember a couple of things that happen during budget time when budget cuts are being discussed, and these are true in government, in business, and in pretty much any context when talking about budgets (even family budgets often). Every time, without exception, when there is talk of budget cuts, here is what will happen:

  •         The person or department who is threatened with cuts will tell you  that they will have to cut the most popular thing, or the thing that will have the biggest impact or the thing that is most critical. Why? As a tactic to ‘show what could happen’ if they don’t get all their money.
  •          They will scream that the program in question only costs _____ cents a day or _____ dollars person and so it doesn’t even save much money. Well, that is really somewhat of a silly response. Overall, when divided among 350 million people in the US then most things are small by comparison. Almost everything is cheap when you look at it like that.   But a savings of a hundred million here and a hundred million there—which is less than 30 cents per person—adds up to some real money.

Budgets are about choices. Very rarely do opposing sides disagree that some program needs money or some issue would be better off with increased funding. The disagreement comes in making choices about how much money and where the money is going to come from.   Any responsible politician (which I realize is somewhat of an oxymoron) realizes that the money supply is not endless.

For context, let’s keep in mind that the national debt has doubled—doubled in the last eight years. So in the last eight years, our country racked up as much debt as we had in the previous 232 years.   The annual federal budget deficit had never been as high as a trillion dollars prior to 2008 but from 2008 to this year, that has happened six times.

(If you are a true policy wonk or political geek, you may read below for a longer discussion of the budget)

Significant Highlights of the Budget

The budget increases defense spending significantly but cuts the budgets of 12 of the 15 other federal government departments, the biggest being the State Dept. and foreign aid and the Environmental Protection Agency (EPA) with the largest cut there in subsidies for renewable energy. Let’s look at some of the budget details, in turn.

The most basic role of any government is to protect its population. Nothing should come as a priority before that. And if that’s the case, a military, police and fire departments are obviously the ones that do that.

There is a fairly wide mainstream consensus that the military and Defense Dept. have been cut to the extreme over the last decade and the declines in overall capability and preparedness of the military have been drastic. For the first time since President Franklin Roosevelt, the United States under President Obama changed our stated policy goal of being prepared to fight an enemy on two fronts, both the Atlantic and Pacific. No longer would the US military be of a size that we would be prepared to confront that potential issue. Further, combat readiness has suffered from a combination of cuts in the size of the military and the increased demands on the smaller force that came from commitments in Afghanistan and the Middle East. Both personnel and equipment were pushed into longer deployments and shorter times between deployments. Readiness has suffered and in some cases, there have been units of aircraft that have had less than 60% of their planes that were ready to operate at a given time. The proposed increase stops the further deterioration of US capabilities during a time we are fighting increasing international threats.

Rather than just spend more money, the proposed budget balances the increases with decreases elsewhere.

The largest cut comes to the State Dept. with large reductions in foreign aid and money for the United Nations as the two biggest areas. This is especially popular to a large section of the population, as there are inevitable questions that always come up about why the government would cut services but then continue to give other countries money or pay to fund the UN who often go against US interests. There are arguments that foreign aid is important because it promotes US interests or may be used to promote things we want, such as when we increased aid to Egypt when they signed their peace treaty with Israel years ago. However, cutting foreign aid was a big part of the populist side of Trump’s campaign so this isn’t surprising.

The other large cut, as a percentage, comes with the EPA and this is by far the most controversial. Much of this come in reaction to significant overreach on the part of the Obama Administration and the rest results from wide disagreement over 1) the human impact on global warming (climate change in the PC terminology) and 2) the impact of coal on that topic. Overzealous bureaucrats at the EPA sought to expand their power and were often indulged.   One example was in the rules passed regulating clean water standards. On the surface, who in their right mind would not want clean water? (and this is the always the argument for the EPA, “who doesn’t want a clean environment?”)   But the Clean Water Act has been ‘interpreted’ by the EPA in ways that go against all common sense except those of a power mad bureaucracy. Additionally, because the EPA is so arrogant that they think they should be able to issue the ‘tablets from the mountain’, they often have argued that their decisions are not even subject to legal review. One case in Idaho that has since been overturned by the Supreme Court will illustrate: a family bought a home in a new subdivision and obtained all the appropriate building permits. The builders came the first day and laid gravel for a makeshift driveway for their equipment and the next day the family was issued an order from the EPA saying that the land was a ‘wetland’ and they were polluting a ‘wetlands’ by discharging gravel into the wetland. After putting their home on hold for years, trying to figure out how to resolve the issue, the Sackett family wrote the EPA to ask how their home in a subdivision was regulated, the only written response they got was to tell them that they had to immediately remove the gravel ‘pollution’ and restore the plot to how it was and they would be fined $32,000 A DAY if they did not comply. The case went to the Supreme Court which unanimously ruled that any citizen had a right to a court review if the EPA was going to effectively seize their property and declare it a ‘wetland’ under their total control.   Unfortunately, this is not an isolated case and the EPA is notorious for their arrogance and heavy-handedness. When learning of these types of bureaucratic power grabs, most people understand that the EPA needs to be brought down a few notches and reminded that they serve people, not the reverse.

The broader issue at EPA is a view on the government’s role in addressing global warming. Since that’s a long discussion, in this budget context let’s suffice it to say that Trump campaigned on reversing the regulations on coal, citing new technology that had already been implemented that made coal a much cleaner fuel. So right or wrong, this isn’t a surprise. But, again, I think most people would agree that money was being spent on ‘renewable energy’ with little regard for results and one only needs to look at the money invested in Solyndra and other energy companies which failed, or subsidies to the Chevy Volt that brought the price of that compact car down to ‘only’ just over $50,000 because taxpayers were subsidizing it by roughly $200,000 per vehicle. Bottom line, it was a subsidy to rich electric car owners. So there should be little question that a good deal of spending on those programs, even if we would all agree on their desirability, was wasted.

Those opposed to budget cuts have made much about cuts to the Meals on Wheels program and to Nation Public Radio (NPR) and the Public Broadcasting System (PBS).   In the case of Meals on Wheels, the assistance program that targets often elderly and disabled adults that simply is not the case and is a publicity stunt. The funding for programs under the Older Americans Act, from which Meals on Wheels gets most of its money, has not been impacted. Block grants to states for a wide range of programs, which some states use to increase Meals on Wheels funding is up for cuts. However, that will be the decision of each state. In any case, Meals on Wheels funding from those sources is a small percentage.

NPR and PBS are being cut. The question here, and more so in the context that budgets are all about choices, is really a pretty basic one and almost a philosophical one (and shows why conservatives and liberals line up on totally opposite sides on this topic): with hundreds of television and radio stations available to everyone, why should the government be getting money from taxpayers so they can have more? Out of the hundreds of stations there are, what is being missed that only the government can provide?

And remember we started off talking about the two things that ALWAYS happen when budgets are cut? One of them is that it will be the most popular or critical thing that will be announced will be cut—so PBS has said that Sesame Street will have to be cut. And, of course, no one would cut Sesame Street, right?   Most everyone loves Sesame Street. And it probably does provide a service for early childhood educational programming. But the thing no one talks about is that Sesame Street would survive without PBS. Sesame Street has been around for decades and has very successful.   The head of Sesame Street makes just under a million dollars a year (the NPR chief makes over $600,000)   And Sesame Street makes about $2.3 million/year just in marketing and selling toys.   Any network would jump at the chance to pick it up if PBS every stopped. So to say that Sesame Street will go away is simply absurd BUT it’s how the budget cut game is played so that’s what gets announced and reported.

The budget will also cut federal subsidies for flood insurance…like those big houses on the beachfront or river that require flood insurance. Having lived in Florida, I was always amazed at the people that built high priced houses on the water’s edge, had them wiped out by a hurricane and then built another on the same spot. If you want to do that, fine. But don’t expect me, who lives in a house less than half the price, to help you pay for your flood insurance.

And the budget proposes to cut Amtrak subsidies, as well. Amtrak has promised for literally decades that it will make a profit but has yet to do so. At some point, we need to treat it like any other business and let it flourish or fail on its merits. There is nothing special about Amtrak more than any other company and if we are going to talk about individuals abusing welfare we also need to talk about corporate welfare every bit as much.

The budget obviously has a lot of issues it covers and will be debated hotly, as it should. One area of bipartisan agreement will likely be $120 million to start work on finding a permanent solution for nuclear waste from the nation’s power plants. Currently there are thousands of tons of used material and both Republicans and Democrats will find common ground on this issue, at least. One can hope, maybe naively, that there will be more upon which they can agree.

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