Donald Trump

Trump’s new budget is never going to happen, says pretty much everyone

Some controversial cuts + a pretty awkward maths mistake = a plan Congress probably won't like.

Trump’s government has just released a plan on how they'll spend American tax money in the next few years. But people don’t seem too impressed.

They’ve called it ‘A New Foundation for American Greatness.’ Mick Mulvaney, who directs the management of the budget, said, “We took the president’s speeches, we took his priorities, and we turned them into numbers.”

The main idea is to massively cut back on the amount the government spends on welfare programmes, and put more money into defense and infrastructure instead. Mulvaney said in a press conference with the media that Trump is “dead serious about the wall”, so that’s definitely going to happen, if they can push it through Congress. And the defence budget is going up too.

So how much money are we talking about?

The budget is based on a few things Trump’s team believes about how the economy works. One, governments should avoid giving people money they haven’t worked for at all costs. Two, the lower taxes are, the more productive companies will be. And three, the less government support an industry gets, the more motivated it will be to do well on its own, and the more profit it will make.

The problem is, they’ve made a pretty basic mathematical mistake – and all the economists are laughing about it (or crying, depending on whether they’re glass-half-full or glass-half-empty kind of people).


Here’s what’s happened:

The size of the budget they’ve presented assumes that taxes on businesses will generate an extra $2 trillion for the United States. Because of the tax cuts they want to make, business will be able to invest money they previously would have given to the government into making more stuff, and generating higher profits. So when they do pay their taxes in a few years time, even if they’re paying a lower rate than before, the total money they’re paying will be enough to bring balance the budget again, maybe even bringing in more money for the government.

Still with us? Great. Small problem though. Trump’s administration has missed out how much the cuts are going to cost the government in the meantime – and most think it’ll be around $5.5 trillion. Woops.

But Mulvaney isn't worried. He says that every budget needs to make some assumptions, and this is theirs. He also pointed out that the budget hasn’t accounted for the fact that the US loses about $486 billion every year because of flaws in the tax system that mean people who should be paying tax, aren’t - what’s called ‘tax avoidance.’ They’re going to make the forms much simpler, which will help close that gap, and bring in more money. Obviously not $3 trillion. But hey, $486 billion is something, right?


Enough with the jargon-busting. Here’s what the budget actually says:

The biggest thing everyone’s talking about in this budget is the changes to Medicaid, a health care problem for people on low incomes which was set up in the 1960s and expanded under Obama. The House of Republicans already voted to get rid of Obama’s restructure, and now Trump wants to suggest to the Congress that they commit to cutting $800 billion off it over the course of the next ten years, which would basically take away health insurance for 10 million Americans.

Other cuts include just under $200bn to something called the Supplemental Nutrition Assistance Program, basically a modern version of food stamps which Obama’s government set up after the 2008 financial crisis. Around 50 million people use them, but the Trump administration says that it was only supposed to be a temporary thing, and now that the stats say America’s economy is in a better place, the programme should be rolled back.

Again, Mulvaney was not happy with the way this plan is being framed in the media right now. His main problem is with the use of the word ‘cuts’. “The way people talk about cuts in DC is not the same way everyone else does,” he said to the media.

His argument goes like this: Budgets for programs like Medicaid are set out over time periods longer than the government writing the budget is actually going to be in power. Obama’s government had set Medicaid to increase over the next ten years. Trump’s government is reducing the speed at which Medicaid would increase, but technically speaking, it’s still increasing - just by $800bn less than Obama wanted it to.

But Mulvaney thinks the program shouldn’t need that much money. Trump’s government wants to give individual states more control over how they run the program, rather than setting the rules on a national level. He thinks that will allow them to run the same services, cheaper, for more people. The risk, of course, is that a state government does a bad job of it - but Mulvaney doesn’t think that’s going to happen.

Is this really going to make Americans’ lives better? Depends who you ask – and which Americans you mean.

"We have plenty of money in this country to take care of people who need help,” Mulvaney said to the press today. “We don't have money to take care of everybody who doesn't. We look at these programs through the perspective of the people paying it….We think this is the definition of compassionate – the balance between the people who get the benefits, and the people who pay them.”

On the one hand, this sounds sensible. But Mulvaney is implying that the reason the government doesn’t have enough money is because people are claiming benefits who shouldn’t be. Most people seem to think that’s not quite right - instead, it’s the $486 billion in avoided tax which Mulvaney himself references that’s more of the problem.

Ultimately, it looks like this is going to be good news for the people at the very top, who’ll welcome a cut to the amount their corporation has to pay the government. But the people in the middle, or the very bottom, who could probably use the money? Not so much.


Next steps: Probably nothing

None of this is set in stone – and actually, virtually no-one seems to think any of it will really happen. “[These] cuts have zero chance of passing,” one senator said yesterday. The way America works is that the government makes a suggestion of how money should be spent, but actually it’s the Congress who make the final decision, and it doesn’t seem like they’re big fans of this proposal. They’ll talk about it today, and see what they think, but it’s probably going to be a case of ‘thanks, but no thanks’. Stay tuned.

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