President Trump released his 2019 budget proposal Monday calling for increased spending on the military, border security and the opioid crisis. But the White House blueprint has already been overtaken by events. The two-year budget deal passed by Congress last week boosts spending for both the military and domestic programs by nearly $300 billion over the next two years, complicating White House efforts to reorder federal priorities.
“We really thought we could cut a deal with the Democrats that would increase defense spending in order to defend the nation,” White House budget director Mick Mulvaney told Fox News Sunday. “But when the doors closed, what happened was they would not give us a single dollar worth of additional defense spending without giving us additional money for welfare spending and that’s just the world we live in.”
The White House offered an amendment to its 2019 budget to account for the additional spending. It also suggested cuts that Congress could make in the current fiscal year.
“What we’re doing is saying, ‘Look, you don’t have to spend all of this money,’” Mulvaney said. “These are spending caps. They’re not spending floors. So you don’t have to spend all that.”
The Republican-controlled Congress largely ignored the proposed spending cuts in the president’s first budget last year, but Mulvaney says the White House is not giving up.
“You are still going to see some reductions in our proposals to the State Department. You still are going to see some reductions in our proposals to the EPA,” he said. “There’s still going to be the president’s priorities as we seek to spend the money consistent with our priorities, not with the priorities that were reflected most by the Democrats in Congress.”
In addition to stepped up military spending, the administration’s budget includes an ambitious, $1 trillion infrastructure program, although most of the money for rebuilding roads, bridges and other projects would have to come from state and local governments or the private sector.
The budget also assumes Congress will agree to spend $25 billion over the next two years on border security — including a controversial wall along the southern border with Mexico — as part of a broader agreement on immigration.
The spending plan calls for nearly $17 billion to combat opioid addiction. And it includes changes to safety-net programs such as Food Stamps that the administration says will help move able-bodied Americans back into the workforce.
The White House budget assumes that economic growth will accelerate, from 2.3 percent last year to 3 percent this year and 3.2 percent next year, spurred on in part by the $1.5 trillion tax cut the president signed in December. Many independent economists see the White House forecast as overly optimistic. Even with the assumption of robust economic growth, the federal deficit is expected to hit 4.2 percent of GDP this year and 4.7 percent next year.
It’s common for the deficit to grow during a recession, when tax revenues slump and spending on safety-net programs increases. In 2009, for example, the deficit was 9.8 percent of GDP. But it’s very unusual for the government to run large deficits when the economy is near full employment as it is today.
“Certainly there’s a risk that interest rates will spike and there’s a concern,” Mulvaney said. But he insisted that the tax cuts, while reducing revenue in the short run, will eventually pay off.
“This is not a fiscal stimulus. It’s not a sugar high,” Mulvaney said. “We have fundamentally changed the structure of the American economy to where we think we can change the long-term trends of our growth possibilities.”