Although President’s Trump “skinny budget” pays for most of its defense spending increases with cuts elsewhere, one-fifth of the spending increases in President Trump’s “skinny budget” are not paid for. Since these appropriations are not emergencies, there is no reason to avoid fully offsetting the cost rather than accepting a $19 billion deficit increase.
The Administration proposed a $54 billion increase in the defense budget for next year (FY 2018), a 10 percent increase above the cap on defense spending, offset by a $54 billion (10 percent) decrease in the non-defense spending cap (see our paper for more details on those cuts).
However, the Administration also requested an additional $33 billion in discretionary funds for the current fiscal year (FY 2017) for defense and border security, offset by only an $18 billion reduction in non-defense spending. They also requested $3.5 billion in additional mandatory spending for veterans, without offsets. As a result, the spending proposal would increase deficits by about $19 billion.
Specifically, the President’s supplemental request for FY 2017 included a $33 billion increase in discretionary funds for FY 2017: a $25 billion increase to the defense caps, $3 billion for the Department of Homeland Security (DHS) for a border wall and additional immigration enforcement, and an additional $5 billion in defense overseas contingency operations (OCO) funding. OCO funds are exempt from spending limits and are often used to circumvent spending caps.
The budget also requests $3.5 billion in mandatory funds to continue the Veterans Choice program for 2018, which will expire in August. That program pays for veterans to see private doctors in some situations when they've been on a wait-list for longer than 30 days or live more than 40 miles from a VA facility. When the Veterans Choice program was enacted in 2014, we raised concerns it could become an unfunded entitlement program if policymakers continued the program without paying for its cost.
Though the specifics of the FY 2017 spending increases are provided, the details on the non-defense cuts are not. The supplemental proposes to reduce the overall level of non-defense discretionary spending by $15 billion, back to sequester levels of $504 billion (essentially reversing the non-defense increases in the Bipartisan Budget Act of 2015). After the $3 billion increase for DHS, other non-defense agencies would be cut by $18 billion.
|Increase FY 2018 caps on defense spending for FY 2018||$54 billion|
|Increase caps on defense spending for FY 2017||$24.9 billion|
|Increase OCO defense spending above the caps in FY 2017||$5.1 billion|
|Extend Veterans' Choice Program for one year||$3.5 billion|
|Increase Department of Homeland Security funding for FY 2017||$3 billion|
|Total, Spending Increases||$91 billion|
|Decrease caps on non-defense spending for FY 2018||-$54 billion|
|Decrease non-defense non-DHS spending for FY 2017||-$18 billion|
|Total, Spending Decreases||-$72 billion|
|Net Deficit Impact||$19 billion|
Source: CRFB calculations based on Office of Management and Budget. Numbers may not sum due to rounding.
Reducing current year (2017) spending may cause large cuts to some agencies. For instance, the current spending caps for non-defense for 2017 are $519 billion, and the proposal reduces the overall caps on net by $15 billion or about 3 percent. However, appropriations have already been passed at the higher-level through the end of April. Since agencies will have already been spending at the higher level for seven months out of the fiscal year, cuts would need to be more aggressive for the last half of the year. If spending is evenly distributed across the year, it would take a 9 percent reduction in non-defense, non-DHS spending starting in May to get $18 billion in savings in the last five months of the fiscal year.
In a statement, we called for President Trump to make sure that all his spending increases are paid for, not just four-fifths of them.
Within this budget, we are pleased that President Trump pays for his 2018 military spending hikes. It is encouraging that the Administration is generally abiding to the principle that if something is worth doing, it is worth paying for. His 2017 increases should be fully paid for as well.
President Trump’s spending cuts are concentrated in the smallest and slowest growing portion of the budget. We encourage him to follow up promptly with a more comprehensive budget that makes clear how his agenda fits together and what it would mean for spending, revenue, deficits, and the national debt.