Via Financial Times

Donald Trump has called for a $4.6tn cut to projected spending over the next decade, in a budget proposal that slashes key planks of the US social safety net while preserving sweeping tax cuts in an effort to draw a sharp contrast with policies proposed by Democratic presidential candidates.

The $4.8tn plan released on Monday was Mr Trump’s last annual budget before the November presidential vote, in which he can expect to face a Democratic candidate calling for higher taxes on the wealthy to boost funding for a vast array of government programmes. 

Although the US president campaigned on a pledge to rein in America’s national debt, Mr Trump has presided over increasing annual budget deficits since he entered office, with the fiscal gap estimated to hit nearly $1.1tn this year, or 4.9 per cent of gross domestic product.

In his budget proposal — a wishlist of White House policies that is unlikely to be approved by the Democratic-controlled House of Representatives — Mr Trump is calling for some higher spending on defence and infrastructure, as well as a plan for paid parental leave.

The $740.5bn defence budget proposes to increase investment in nuclear and hypersonic systems as the Trump administration seeks to develop new weapons to counter threats from China and Russia.

The next few years will bring “a massive uplift in hypersonics investments across the Department of Defense,” Ryan McCarthy, secretary of the army, told the FT in an interview, as the US tries to keep up with geopolitical rivals in fielding high-speed missiles.

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The president’s budget also includes $18bn for space, including the creation of the new US Space Command requested by Mr Trump, who wants America to be the first country in the world to put people on Mars.

Mr Trump is seeking large-scale reductions in “non-defence discretionary” spending, which covers many domestic programmes, as well as lower spending on Medicaid, the government healthcare scheme for the poor, and less funding for disability benefits and student loans.

Russ Vought, the acting US budget director, said the White House would be seeking a 21 per cent cut in the foreign aid budget, which has emerged as a big target in the Trump era, even though the US administration says it is looking to counter China’s growing diplomatic and economic influence around the world.

“We believe that the era of spending money for a Bob Dylan statue in Mozambique, or a professional cricket league in Afghanistan, those days are over,” Mr Vought told CNBC on Monday.

Over 10 years, Mr Trump’s desired spending cuts would add up to $5.2tn and would be only partially offset by higher spending of $585bn, bringing the annual budget deficit down to 0.7 per cent of GDP, the White House said. 

Nancy Pelosi, the Democratic House speaker, slammed Mr Trump’s budget plan, and suggested there would be little room for compromise on the president’s policies this year.

“The budget is a statement of values and once again the president is showing just how little he values the good health, financial security and wellbeing of hard-working American families,” Ms Pelosi said in a statement. “Year after year, President Trump’s budgets have sought to inflict devastating cuts to critical lifelines that millions of Americans rely on.”

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But while Mr Trump has proposed axing projected spending on some key social spending measures, he has tried to limit the most politically unpopular reductions to Social Security, the government pension scheme, and Medicare, the government health plan for the elderly. 

In its budget, the Trump administration is forecasting economic growth of 3.1 per cent this year, which is much higher than the expectations of economists on Wall Street, at the Federal Reserve and at the IMF, who predict output will increase at a rate closer to 2 per cent.

Even Steven Mnuchin, the US Treasury secretary, last week warned that US growth may fall short of 3 per cent this year because of the impact of the coronavirus on the global economy, and Boeing’s struggles with the 737 Max aircraft.