Waiting for the Next Shoe to Drop? It Just Did!
A Quick Overview of the President’s New Budget
Congress approved a $1.5 trillion tax cut over the next decade. Then it approved a budget for the next two years that increases defense and domestic non-entitlement spending, and funds the recent hurricanes and wildfires and wars we are fighting. Not surprisingly the annual budget deficit has just about doubled to about $1 trillion annualized, going from about 3% of GDP to 4.7% of GDP. This may be contributing to the recent Wall St. uncertainties.
The President in his most recent budget proposes the following:
· Making all the recent temporary tax cuts permanent -- $550 billion.
· Cutting non-defense discretionary spending by 42% from the current level of $756 billion to $436 billion by 2028. This impacts programs like Head Start and programs in government agencies like the EPA, HUD, the State Department and federal, state and local law enforcement.
· 34% cut to the EPA, 30% cut to the National Science Foundation and 22% cut to the Army Corps of Engineers (think dams, levees and harbors).
· $777 billion increase in Defense Spending over the next decade.
· 7% cut to Medicare – provider reimbursement cuts
· 22% cut to Medicaid – repeal ObamaCare coverage expansions
· 27% cut to Food Stamps – a shift to food boxes.
· 20% cut to Section 8 housing assistance for rental assistance
· $199 billion increase over the next decade for infrastructure, offset by a $178 billion cut in transportation spending.
· $203 billion in cuts to student loans, loan fogiveness and other programs for students in higher education.
In the realm of magical thinking, the President’s budget assumes GDP growth of 2.8 to 3% for the next decade (we wish). Private forecasters project growth of 2.1%; the Federal Reserve 1.8 to 2%, and CBO 1.4 to 1.9%.
Prepared by: Lucien Wulsin