Trump's 2021 Fiscal Year Budget Priorities

Early in BO’s administration Ann Coulter recommended the elimination of the Departments of Health & Human Services, Education, Commerce, Agriculture, HUD, Transportation, the EPA, the National Endowment of the Arts, the National Endowment for the Humanities, & the progressive income tax & instituting a flat tax.  At the time, I seconded Ann’s recommendation except I recommended eliminating the progressive income tax & replacing it with the FairTax.

 

On February 10, 2020 President Trump released his budget for fiscal year 2021 (October 1 to September 30 2021) entitled 

A Budget For America’s Future – Fiscal Year 2021..

 

Trump’s budget calls for nominal GDP levels of $22.5 trillion to $36.6 trillion from 2020 to 2030 respectively, real GDP growth of 2.8% to 3.1% over the next ten years, a CPI inflation rate averaging 2.3%, ten year Treasury note rates of 2.0% in 2020 increasing to 3.2% in 2030, & the annual average civilian unemployment rate rising from 3.5% in 2020 to 4.0% in 2030.  See Table S-9, entitled Economic Assumptions below.

In 2020, the U.S. will spend $1.29 for every $1 that it will collect in revenue (Outlays = $4,790 billion / Receipts = $3,706 billion leaving a budget deficit of $1,083 billion ).  See Table S-1, entitled Budget Tools below.

Professor Friedman taught that money available for taxation is composed of direct taxes & borrowing & that the portion of the national debt that is paid every year is the interest payments on that debt.  Who could possibly think that if the budget deficit was magically wiped out that government spending would be reduced to equal revenue.  No, government spending would still equal the $4,790 billion listed in the table above for 2020.  A deficit is simply a form of hidden taxation financed either by printing money or by an invisible tax on all property as more money is taken from the future income of that property.

 

Increasing the debt is the easiest thing in the world for politicians to do because they know that interest payments are the least damaging expenditure of government.  Interest payments  are simply transfers from tax payers to bond holders that do not use up any resources – there is no labor that is unavailable for something else.  It is the opportunity cost of what could have been done with the money provided by bondholders that is the real cost & this is the most evil & cruelest part of debt financing – the part that is never seen or even imagined except by that one person in a million that Lenin did not want to meet.

 

With GDP growing a little over 2% per year the Congressional Budget Office reports that for the fiscal year ending September 30, 2019 revenue grew 4% & spending grew 8.25% meaning economic growth is generating additional tax revenue but the government is growing 4 times faster than the economy.  Now you don’t have to be long time subscriber Economics 501 to know this is not sustainable.  Do your own calculations using the CBO table below to derive the revenue-spending relationship for fiscal year 2019.

The above fiscal year 2021 Trump budget has proposed increases in outlays for defense & veterans but has also included lower nondefense spending & according to Forbes’ analysis calls for eliminating such fraudulent items as paying $10 billion Social Security benefits to dead people or benefits to the supposed six million people on Social Securities’ books who are 112 years old or older – for the record there are only 40 people in the whole world that are 112 & older.  Forbes also reports that Medicare & Medicaid overpaid recipients by $67 billion last year & that the IRS wrongly paid out $18.4 billion through the earned income tax credit program.

 

But all of the above mistaken payments are small in the overall scheme of things & in all likelihood neither these mistaken payments or the entitlement spending that causes the large budget deficits will be addressed by a Democrat House until after the November presidential election.  Since funding of the federal government is in place through the end of the fiscal year we should expect to once again go the Continuing Resolution government funding route starting on October 1 & lasting @ least until next winter when a new government convenes.

 

Sixty percent of federal spending goes toward paying Social Security, Medicare, & Medicaid – the three programs that constitute the cornerstone of America’s welfare state.  Ten percent of federal outlays goes toward paying interest on the national debt leaving 30% for discretionary spending like defense, food stamps, foreign aid, & the departments listed for elimination @ the top of this post.

 

Our elected representatives’ (i.e.,  temporary politicians) inhumanity & lack of regard, concern, or sympathy for people dependent on Social Security & Medicare has been on full display for decades – both programs are headed for substantial reduction in benefits in the not too distant future. 

 

Page 2 of the 2018 sample statement on the Social Security website clearly says that “by 2034, the payroll taxes collected will be enough to pay only about 77 percent of scheduled benefits.”  Of course the alternative to lowering benefits is to raise taxes.  Joe Sternberg wrote in the WSJ “one also has to ask why future generations of workers should be forced to pay higher proportions of the fruits of their labors to fund benefits for old timers who refused to raise their own taxes or to reform benefits.”

 

The problem with Medicare is that Medicare Part A is facing a funding shortfall that will require a 12% reduction in hospital benefits by 2029 & the cost of Parts B & D, which are 81% funded by general revenue from the Treasury, are growing too fast to be sustained.

 

If you are interested in solutions to the Social Security & Medicare problems click on the referenced posts listed below.

 

As we all know from previous budgets President Trump’s obvious interests are funding Defense & reducing the trade deficit through leveling the playing field in the global economy of international trade.  Students of international economics know there is no such thing as free or fair trade because virtually every country in the world uses tariffs, quotas, quota licenses, tariff rate quotas, export quotas, domestic content requirements, subsidies, export subsidies, dumping – sporadic, predatory, & persistent government procurement policies, & social regulations such as the average fuel economy standards of cars to protect their workers.  And of course the workers needing the most protection are the lowest skilled least educated people. 

 

Accordingly, as politicians try to buy votes to get re-elected or elected to higher office in 2020, President Trump works to put America first realizing there is no free & unfettered trade. Protectionist trade policies implemented to benefit the weak, in one form or another, reigns @ the expense of the American worker & consumer, & this is the state of affairs President Trump is trying to improve upon.

 

Referenced Posts:

 

CPI & Economic Growth Provide Solution To Social Security Funding Problem

 

Premium Support Provides Solution To Medicare Funding Problems