Trump's budget sets up an 'epic battle' over government spending

There’s another fight brewing in Washington, which analysts predict could be of “epic proportions.”

President Donald Trump’s team is expected to roll out its fiscal year 2018 budget proposal this week, starting the process of laying out the government’s funding future.

Analysts say it is unlikely Trump’s budget proposal will resemble what makes its way into law, based on what’s reported to be included. It does, however, set up a larger philosophical battle that will reveal the ideological dynamics in Washington.

In the deal

The deal is expected to include proposals for major cuts in domestic sending programs across the board, especially deep slashes in the Environmental Protect Agency and State Department.

According to a report from Axios’ Jonathan Swan, the budget proposal will also include deep cuts to spending on Medicaid — the program that provides health coverage for low-income Americans — and other entitlements that will total $US1.7 trillion over the next 10 years. Other proposed entitlement cuts, according to Axios, will come from food stamps, the Children’s Health Insurance Program (CHIP), and disability insurance.

The Washington Post’s Emma Brown, Valerie Strauss, and
Danielle Douglas-Gabriel reported that the budget would also cut $US10.6 billion from federal education initiatives, including college work-study programs and public-service loan forgiveness — while at the same time increasing investments in charter schools.

That, according to reports, would allow the federal government to have a balanced budget in 10 years.

At the same time, spending on the departments of defence, homeland security, and veterans affairs would increase substantially.

Whether or not the proposal includes funding for some of Trump’s pet projects, such as the wall along the border with Mexico, is not yet clear.

‘Epic battle’

The Trump budget’s prioritisation of military and defence spending at the expense of many other departments will make for a tough battle in Congress, analysts say.

Greg Valliere, chief investment strategist and political analyst at Horizon Investments, said in a note titled “An Epic Battle Over Fiscal Policy Begins This Week” that the fight could reveal the fissures between Republicans in the two chambers of Congress.

“And make no mistake, this is will be an epic fiscal policy showdown that highlights a fundamental issue: concentrating spending power in Washington versus the states,” Valliere wrote in a note to clients on Monday. “And it will pit the House, which is dominated by conservatives, against the Senate, which is dominated by moderates and liberals.”

Chris Kruger, an analyst at Cowen Washington Research Group, gave an even more blunt take on the White House budget proposal.

“The budget has already been declared DOA on Capitol Hill … by Congressional Republicans,” Kruger said in a note to clients Monday. “Budgets are governing documents, and this is no different from a headline and policy-noise perspective.”

Valliere said the biggest disagreement would come over the cuts to mandatory entitlements and likely will get no traction on either side of the aisle.

“This will hit a brick wall in the Senate and Trump will get the worst of both worlds: scathing criticism from the left for these spending cuts, and the inability to get most of them enacted,” Valliere said.

Trump repeatedly promised through the campaign to make no cuts to entitlements, including Medicaid.

“I was the first & only potential GOP candidate to state there will be no cuts to Social Security, Medicare & Medicaid,” Trump tweeted on May 7, 2015.

In the end, it is more likely that Congress will devise its own budget deal between the House and Senate. With competing interest and the pet projects of various lawmakers, it is likely that deep domestic cuts would not be enacted, said Issac Boltansky and Lukas Davaz of the political research firm Compass Point.

“The White House’s budget proposal will drive headlines over the week ahead as key administration officials head to the Hill, but this proposal should be viewed as nothing more than an opening move in a long and labored budget process that will shift significantly in the months ahead,” the analysts wrote.

Next steps

The budget proposal will be rolled out early this week, and Mick Mulvaney, the director of the Office of Management and Budget, will testify in a series of hearings.

The degree to which Mulvaney, a former representative from South Carolina and member of the hard-line conservative House Freedom Caucus, is combative during his testimony will be indicative of just how hard the Trump administration will be on their budget priorities.

Congress will have to pass a budget resolution by the end of September to keep the government from shutting down.

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