As the bombshells continue to drop on the Trump administration, behind the scenes Trump’s first detailed budget proposal is being developed, and it has a few bombshells of its own, particularly for the poor. The budget proposal is not yet finalized, so the details could change, but according to what has leaked so far, the budget is a combination of tax cuts for the wealthy, reduced spending on social programs that serve the needy, and wishful thinking about tax cuts and economic growth.
Tax Cuts: It should be no surprise that the Trump budget includes large tax cuts for the wealthy. But the magnitude of the cuts is staggering. The cuts would result in a loss of tax revenue of more than $5 trillion over the next decade (over $500 billion per year on average). And the beneficiaries will mainly be the wealthy. According to calculations from the Center for Budget and Policy Priorities, each household in the top 1% would receive approximately $250,000 per year, and the 400 taxpayers with the highest incomes would each receive at least $15 million per year, for a total of “at least $6 billion annually.” As the CBPP points out, “$6 billion is more than the federal government spends on grants for major job training programs to assist people struggling in today’s economy,” and it is “roughly the cost of providing 600,000 low-income families with housing vouchers.”
How will the tax cuts be paid for? The administration claims these tax cuts will spur economic growth and that will go a long way toward paying for the tax cuts, but the evidence from past tax cuts does not support this claim. There is evidence that tax cuts for middle and lower-income households stimulate the economy, but unfortunately, the details on how the plan will help middle and lower income households, are “fuzzy or non-existent.” Perhaps the administration doesn’t feel it’s important enough to provide these details, but it seems more likely that it’s an attempt to obscure just how small these tax cuts would be. In any case, the debt will almost certainly be much larger than projected in the Trump budget.
The other way the tax cuts are paid for is through program cuts, cuts that are likely to be even larger down the road as the debt begins to increase.
Medicaid and SSDI: The Trump budget proposal includes cuts to Medicaid that go beyond the cuts in House health care bill, and it also includes cuts to Social Security Disability Insurance.
The cuts to Medicaid in the House health care bill, as the CBPP notes, “would have a devastating impact on health care for over 70 million people who rely on Medicaid, including over 30 million children and millions of seniors, people with disabilities, pregnant women, and low-income adults.” Trump’s proposal would make these numbers even worse. So much for his promise that Medicaid would not be cut.
The cuts to SSDI would mostly affect people over 50, “About three-fourths of beneficiaries are over 50, and more than one-third are over 60” and it would reduce enrollment by 14 million people by 2026. This will reduce the economic security available for people who are disabled before retirement and for families who are dependent upon a family member who dies.
Additional Cuts to Social Programs: The cuts to Medicaid and SSDI are not enough to reach the $800 million in cuts to programs over the next ten years in the Trump budget proposal. As Roll Call reports, “It’s not clear which programs might be cut beyond Medicaid but means-tested mandatory spending programs include food stamps, Temporary Assistance for Needy Families, Supplemental Security Income, child nutrition programs and the Pell Grant program.” As noted below, Pell Grants appear to be protected, at least for now, but the cuts to the other programs would fall mainly on children, needy families, the unemployed, and others who are in need of help.
Schools: The Washington Post’s analysis of the cuts to public schools identifies 22 public school programs that would be eliminated, including:
- After-school programs serving 1.6 million mostly low-income children ($1.2 billion)
- Teacher training and class-size reduction ($2.1 billion)
- Child care for low-income parents in college ($15 million)
- Arts education ($27 million)
- Programs for Alaska Native and Native Hawaiian students ($65 million)
- International education and foreign language programs ($72 million)
- A program for gifted students ($12 million)
- Special Olympics education programs ($12 million)
- Mental-health services, anti-bullying initiatives, physical education, Advanced Placement courses, and science and engineering instruction ($400 million)
Take a look at those cuts, and remember that each of the 400 highest income taxpayers will receive $15 million from the tax cuts, $6 billion in total per year.
And that is not all, programs that would be cut but not eliminated include:
- Career and technical education ($168 million, down 15 percent)
- Adult basic literacy instruction ($96 million, down 16 percent)
- An Obama-era initiative to build networks of support for children in needy communities ($13 million, down 18 percent).
- Pell Grants for students in financial need are preserved, but the budget would eliminate more than $700 million in Perkins loans for students with exceptional financial needs
- The work-study program ($490 million, down almost 50%)
The cuts weigh heavily on low-income students at all educational levels, but the administration claims these students will be even better off in the end since the cuts will be used to promote school choice, “including $500 million for charter schools, and $250 million to be used to study and expand the impacts of vouchers for private and religious schools.” An additional $1 billion would be devoted to a new grant program for school districts in poor areas “that agree to allow students to choose which public school they attend — and take their federal, state and local dollars with them.”
But “portability” of federal dollars may, as many Democrats claim, “siphon dollars from schools with high poverty to those in more affluent neighborhoods,” leaving them even worse off.
Renewable energy: The proposed budget is expected to cut funding for research on wind and solar energy ($1.45 billion, down 69%).
This is a mistake, in my view. We should be increasing the funding for these programs instead of cutting it. Wind and solar energy are going to be needed whether the administration wants to admit it or not, and not just in the US. Why not fund research that will lead to new technology and new products, put people to work creating the infrastructure that will be needed to make these discoveries work on a large scale, and export the products and technology to other countries? Why end up buying it from them instead?
This brings up another issue. Trump promised to spend $1 trillion on new infrastructure, but this does not appear to be part of the budget proposal. If Trump is going to increase the debt by more than $5 trillion, doing it through infrastructure spending instead of tax cuts would be a much better way to do it. The effects on economic growth are likely to be much larger, and there’s no doubt that much of our physical infrastructure is in need of repair.
But social infrastructure is also important for our economic well-being. We cannot reach our economic potential if a sizeable segment of the population does not get the schooling, health care, housing, and nutrition that is needed. Workers who face ruin simply from losing a job – loss of a home, inability to provide enough food, loss of health insurance, college and retirement savings wiped out – will have difficulty returning to the workplace when times get better, and many will be lost forever. We can’t leave our elderly homeless and hungry. Cuts to programs that keep people healthy, help them get the education they need to reach their potential, provide for their retirement, and protect them during bad economic times will make us worse off in the long-run. After spending part of the $5 trillion on physical infrastructure, the rest should be spent improving our social infrastructure. It’s just as important.
But that would require giving up tax cuts for the wealthy.