Facing pressure over this year’s projected $779 billion deficit, President Donald Trump has requested that the members of his cabinet find 5% cuts in their respective departments.
The cuts
Trump made reference to the “penny plan” in calling for 5% cuts. The “penny plan” is a deficit reduction plan most notably advocated for by Sen. Rand Paul, would require a cut of just one penny from every dollar spent. Even after only a few years, chipping away at the budget slowly with the annual 1% cut can solve the deficit by 2023 (assuming nothing catastrophic happens to the economy in the meantime). It might be more appropriate to dub Trump’s version the “nickel plan.”
“We’re going to ask every Cabinet secretary to cut 5 percent for next year,” Trump told his Cabinet. “It’s not as tough as you think, and frankly there’s a lot of fat in there,” Trump added, while noting that “we had to get the military done last time.” Trump also blamed Democrats in part for the deficit: “In order to get that $716 billion, I had to give up things to the Democrats that I hated to give up. But we had to rebuild the military.” Trump also clarified that 5% cuts are the minimum he’s demanding from each department.
Deficits, taxes, and spending
Are tax cuts or spending to blame for the rising deficit? Both to some extent, as tax cuts should always be accompanied by spending cuts (and were not, in the most recent Trump tax cuts). Trump did offer up $54 billion in annual cuts back in 2017, but Office of Management and Budget’s Director Mick Mulvaney confirmed that they didn’t materialize. “We had offered $54 billion worth of discretionary cuts in our budget back in March. Only about 4 or 5 billion have survived so far on the hill. We’re not going to be able to cut our way to balance.” And just last June, the Senate rejected $15 billion in spending cuts that Trump requested, or $150 billion over a decade. So in that regard, blame Congress.
Back in March President Trump requested line-item veto authority after signing a $1.3 trillion omnibus spending bill. If granted such a power, it would allow him to veto any discretionary spending in a budget passed by Congress that he wants to be removed.
Given how Congress never seems to reduce spending, and has rejected all cuts Trump has proposed so far, that could be the only option he has left if these 5% cuts don’t play out as expected.
