Proposed Trump Budget Cuts to States Not Happening. At Least Not Yet.

Congress passed a continuing resolution to re-open the federal government two weeks ago and provide spending authority for all current programs. Promises were made to address the ongoing Deferred Action for Childhood Arrivals issue. And, no spending reductions proposed by the president last May were approved. Nasty budget bargaining was still expected. Now it seems the Senate has just agreed to a very workable budget compromise for the next two years which would also include extending the debt limit through March 2019.

Some background:

The fiscal 2018 federal budget proposed by President Trump in May 2017 included massive reductions to non-defense discretionary programs with corresponding large increases for defense and for a “border wall” with Mexico. It significantly reduced every social program that all states administer with cuts of $54 billion in the first year—and a total of $1.7 trillion over the next decade in mandatory spending.  

Proposed reductions were unnecessarily punitive to people in need of assistance. For example, the president’s budget eliminated the Affordable Care Act, initiated block grants for Medicaid— which would reduce funding—and proposed sizeable cuts of 31 percent to EPA programs. Furthermore, there were large reductions in funding for transportation, home energy assistance, children with disabilities, clean water, and supplemental food programs for Women, Infants and Children—a program particularly singled out for reductions.   

In discussion with colleagues I argued that “it will never happen” and suggested we wait till Oct. 1, 2017 to see what happens. Well it is now February 2018 and, so far, my prediction has been pretty good. In fact, if the House can agree with what the Senate has just tentatively approved it will be a major breakthrough.

Jumping Over Hurdles

Unlike budgets submitted by governors a presidential budget must traverse through so many hoops that it was highly unlikely the president’s budget would pass as submitted—especially one as draconian as proposed by the president. The federal budget route is so convoluted I was confident Trump’s budget would not be implemented. Specifically, the presidential budget must be reviewed by two budget committees, numerous authorization committees, 12 appropriation subcommittees—and then a final reconciliation between the House and Senate for each of 12 appropriation bills. Each appropriation bill must then be signed by the president. Unlike most governors, the president does not have line-item veto authority.

I observed the only committees that really matter are the the House and Senate Appropriation committees—and in my experience rationale committee chairs will prevail and aid to states will only be marginally affected. More significantly, it now seems that Senate Majority Leader McConnell and Minority Leader Chuck Schumer have provided the necessary leadership and reached a bipartisan agreement on funding levels.

To date there are no appropriation bills approved for fiscal 2018 which began on Oct. 1, 2017. Instead Congress has passed four continuing resolutions—the recent one just approved is good through Friday. These CRs essentially allow spending at the same level as the prior year (fiscal 2017)—which means no cuts in federal aid to states. Absent these CRs, or actual appropriation laws, the government shuts down—as it did in January. It now appears we have a great chance for a budget deal for two years providing an additional $80 billion in defense spending; $60 billion for domestic programs; the lifting of budget caps; and an additional $90 billion for disaster assistance. An additional CR may still be necessary to allow enough time for the House to review and hopefully approve.

Reconciliation Process

A point of information—unlike the failed attempts to eliminate the ACA and decrease Medicaid—the ‘Reconciliation’ process cannot be used for discretionary programs (defense and most domestic programs). So, each appropriation bill (or an Omnibus Bill) requires 60 votes – not a simple majority. So, my expectation is that a compromise will ultimately be reached by thoughtful legislators.

A recent contentious point was the renewal of the Children’s Health Insurance Program. By federal definition, CHIP is a “mandatory program” and is not subject to the annual appropriation process. But, unlike other mandatory programs such as Social Security and Medicare which are authorized “forever” unless legislatively altered, CHIP was approved for a specific time period which expired. Congress approved temporary funding for states through March 2018 and some Republicans were using its possible demise as a threat to achieve other goals. Thankfully, CHIP was extended for six years as part of the continuing resolution. As a compromise, the Democrats agreed to “defer” several tax increases which were originally intended to help fund the ACA—not a bad trade since these laws are ever going to be implemented—and it has no effect on the ACA. Perhaps this was indeed a harbinger of more good events to come.

Earlier this week, I would have argued that proposed reductions to domestic programs were being used as budget bargaining chips to trade for monies to build a border wall and to increase significantly defense spending. We do not yet know the full details of the Senate agreement but it now appears the dynamic has shifted.

Budget Bargaining

Until this week, unnecessary and inappropriate budget bargaining was being used principally to address the pending deadline for “Dreamers” to remain in the U.S. I guess it was part of the “budget game” but it is a very dangerous game as congress is gambling with the lives of almost 800,000 people. This is not only poor budget-gamesmanship but is morally reprehensible. Furthermore, other pending immigration issues could also be solved by abandoning negative rhetoric and misguided political and moral philosophy and develop comprehensive reform which recognizes the basic principles of humanity and fraternity while addressing security.

As part of the bargaining surrounding the passage of the current CR, there was agreement that Congress would schedule the DACA legislation for a vote. It now appears the dynamic has shifted—at least in the Senate. The budget issues will be handled separately from the immigration issues. It remains to be seen if the separation of the budget deliberation and those related to immigration will be favorable for the “dreamers.” I think it will.

I trust enough rational Republicans and Democrats in both houses will reach a viable compromise—agree on a two-year budget plan; fund increases for needed defense and domestic spending, especially for programs administered by the states. And, then quickly address favorably the fate of Dreamers and other immigrants. The issue of the “border wall” is still a dominant issue and hopefully can be sufficiently finessed in some fashion to satisfy all parties—because as with all laws the president has to ultimately sign these appropriation bills. Let’s hope I am correct.

What a way to run a $4 trillion corporation affecting over 323 million people!