If you’ve ever heard a liberal tell you that Obama ‘cut the deficit in half,’ they’re correct – Obama did cut the deficit in half…. after tripling it, first.
In fact, in Obama’s best year deficit-wise, he ran up a deficit of just over $400 billion, a figure still larger than Bush’s largest deficit year during his presidency.
Which is why, despite supposedly “halving” the deficit, the national debt skyrocketed under Obama.
Even if no changes were made to the federal budget, the national debt is still on track to increase due to the fact that annual spending is increased every year automatically to account for inflation and population growth. Entitlements, the largest part of the federal budget, also increase automatically each year.
Those days seem to be over, and it’s President Donald Trump to the rescue. He’s already undone a large part of Obama’s legacy on regulation, and next step is Obama’s legacy on spending. Here are some of the highlights of the first proposed Trump budget:
- The budget will slash $1.7 trillion in spending on entitlement programs, according to Bloomberg.
- Trump’s budget will include a massive nearly $200 billion cut to the Supplemental Nutrition Assistance Program, the modern version of food stamps, over the next 10 years – what amounts to a 25% reduction, according to The Washington Post.
- The food stamp cuts are part of a broader $274 billion welfare-reform effort, according to a report by The Associated Press.
- The budget calls for about $800 billion in cuts to Medicaid (over the next ten years) beginning fiscal year 2018, WaPo reported.
- The budget also calls for $2.6 billion in border security spending, $1.6 billion of which will be earmarked for Trump’s proposed wall along the U.S.’s southern border.
- The budget is also expected to propose major domestic discretionary spending cuts – an earlier version of the budget called for $54 billion in such cuts next year alone.
H/T: Zero Hedge
We’ll get a formal proposal tomorrow, but as you’d imagine, Democrats are already up in arms.
And frankly, it’s about damn time.
Any cuts will be opposed by Democrats in Congress, but we’ve been living off borrowed money for decades now. The money has to run out eventually – and it’s preferable to stop the waste before things get that bad.
Even with these cuts, more will be needed. The national debt is projected to increase by nearly $10 trillion over the next decade at current rates.
Assuming Trump’s increase in military spending stays at that elevated level, let’s approximate a $540 billion cost over the next ten years. That combined with the spending cuts leads to a net reduction of $2.2 trillion in the projected deficit.
Economic growth could serve to close the gap further, mainly due to gains in the labor force participation rate. While unemployment is now at record lows of 4.4 percent, there isn’t much room for that to fall much quicker. While the “official” unemployment figure won’t fall much further, that doesn’t mean there isn’t “room” for more job creation. As you may remember, one of the reasons the unemployment rate fell under Obama wasn’t because the economy was improving, but because it was worsening.
How? Because the unemployment statistics only count people looking for work. Those who quit looking for work and leave the labor force are no longer counted as “unemployed,” and thus aren’t counted in the statistics, even though they literally are not working, and would like to work. 9.9 million people got a job under Obama’s tenure – but 14.6 million left the labor force.
If the labor force participation rate grows under Trump (and it has begun to tick up slightly), the government’s tax base will rise, and it’ll also lead to fewer government welfare payments as the newly employed are eligible for fewer benefits. Suppose Trump can just get 10 million people of the 14.6 million who left the labor force under Obama employed. If each employed person leads to a net saving of $10,000 to the taxpayer on aggregate (due to taxes paid, and fewer government benefits received), that’ll take $100 billion a year extra off the deficit, or a trillion over ten years.
More cuts need to come, but this is a hell of an improvement from any budget proposed by Barack Obama.
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