Trump Said to Seek Balanced Budget

Trump Said to Seek Balanced Budget

President Donald Trump is set to seek a fiscal policy over the next ten years that ultimately results in a balanced budget for the United States, but at the cost of funding for numerous agencies and programs, while the President simultaneously seeks lower taxes and regulation as well as higher military spending. Living up to a campaign promise, the budget Trump is set to unveil does no seek cuts to Medicare and Social Security.

United States fiscal policy remains complicated as discretionary programs have been repeatedly cut over the years, leaving safety net entitlements and the military among the few options to achieve savings. Yet, cuts to those programs are often unpalatable for politicians.

Percentage of Federal Spending, 1986 and 2016.

Over the past thirty years, federal spending reflects lower military spending from the end of the Cold War, lower interest payments from a decline in interest rates, and fairly controlled spending on other discretionary items. At the same time, retirement entitlements – particularly from health care, have soared.

Further cuts to programs for the working poor as well as funds for the State Department and for things like protecting the environment and ensuring food safety are likely to meet stiff opposition in Congress. It’s also not clear how the blue collar workers in the rust belt that supported Trump in the last election will view cuts to social programs while taxes are slashed.

One thing that all sides seem to agree on is that stronger economic growth is needed to get the budget back into balance. But, that’s where the agreement ends. Trump’s economic team argues that growth can be propelled higher through cuts to regulation and taxes. But, many economists have argued that there are few policy prescriptions likely to jolt growth much higher from its 2% trend growth since the labor force is growing more slowly than in past years and productivity growth has waned for several years.

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