U.S. President Donald Trump wants lawmakers to slash $3.6
trillion in government spending over the next decade, taking aim in his first
budget plan at healthcare and food assistance programs for the poor while
boosting the military.
The Trump administration will ask Republicans who control
the U.S. Congress - and the federal purse strings - for the politically sensitive
cuts.
The proposal in its current form is unlikely to be approved
by lawmakers as they craft their own tax and spending plans but the document
makes Trump's budget priorities clear and lays down a marker with Congress.
Trump seeks to balance the budget by the end of the decade,
according to a preview given to reporters on Monday. There is some new spending
in his plan for fiscal year 2018, which starts in October.
The Pentagon would get a spending hike, and there would be a
$1.6 billion down payment to begin building a wall along the border with
Mexico, which was a central promise of Trump's presidential campaign.
Trump's proposal foresees selling half of the U.S. emergency
oil stockpile, created in 1975 after the Arab oil embargo caused fears of price
spikes. The announcement surprised oil markets, and briefly pulled down U.S.
crude prices.
The biggest savings would come from cuts to the Medicaid
healthcare program for the poor made as part of a Republican healthcare bill
passed by the House of Representatives.
Trump, who is traveling overseas this week, wants lawmakers
to cut more than $800 billion from Medicaid and more than $192 billion from
food stamps.
Republicans are under pressure to deliver on promised tax
cuts, the cornerstone of the Trump administration's pro-business economic
agenda, which would cut the business tax rate to 15 percent from 35 percent,
and reduce the number of personal tax brackets.
But their policy agenda has stalled as the White House
grapples with the political fallout from Trump's firing of former FBI Director
James Comey whose agency is probing alleged Russian meddling in the 2016 U.S.
election.
Republican leaders in the House said lawmakers would be able
to find common ground with the budget plan.
"At least we now have common objectives: grow the
economy, balance the budget. So at least we are now on that common ground, and
we will have a great debate about the details about how to achieve those
goals," U.S. House Speaker Paul Ryan told reporters.
STOCKS HIGHER
U.S. stocks were slightly higher on Tuesday as investors
parsed details of the plan.
"The budget will not pass in its current state, but
people will keep an eye on any sort of indication of corporate tax reform as
well as infrastructure spending," said Nadia Lovell, U.S. Equity
Strategist at J.P. Morgan Private Bank in New York.
Senator Claire McCaskill of Missouri said Trump's plan would
devastate rural areas - with the Medicaid cuts directly hitting hospitals and
nursing homes - and harm poorer voters who backed Trump at last year's
presidential election.
"This is a sea change in terms of how we would look at
taking care of the most vulnerable in our country. And frankly it is really
going to have a big impact on the parts of my state that were the biggest
supporters for Donald Trump," she said.
The budget foresees an increase in military spending. Trump
is seeking a $52 billion hike, which is almost 10 percent higher than current
budget caps but only three percent more than what former President Barack Obama
had sought in his long-term budget plan.
The Republican president has vowed to build up the armed
forces, as the United States faces challenges from adversaries like Islamic
State, Iran and China.
Trump upheld his promise - for the most part - that he would
not cut Medicare and Social Security, two social insurance programs that
deficit hawks have long targeted for reforms.
Those so-called entitlement programs may not come out of
Capitol Hill unscathed, however. House Majority Leader Kevin McCarthy, a fellow
Republican, said lawmakers would have to reform both programs to save them.
"We have to look at the entitlements if we believe that
we want them to be there for future generations," he told CNBC.
The healthcare bill passed by the House aims to gut the
Obama administration's signature 2010 Affordable Care Act, known as Obamacare,
that expanded insurance coverage and the government-run Medicaid program. But
it faces an uncertain future in the Senate, which is writing its own law.
The White House proposed changes that would require more
childless people receiving help from the Supplemental Nutrition Assistance
Program, better known as food stamps, to work.
The budget plan would slash supports for farmers and impose
user fees for meat inspection. Another politically fraught item is a proposal
for cuts to the U.S. Postal Service, a goal that has long eluded lawmakers and
administrations from both political parties.
Most government departments would see steep cuts, particularly
the State Department and the Environmental Protection Agency.
The plan drew immediate fire from lobby groups, including
from the Committee for a Responsible Federal Budget, which said it relied on
"rosy assumptions," gimmicks and unrealistic cuts.
"While we appreciate the administration's focus on
reducing the debt, when using more realistic assumptions, the president’s
budget does not add up," Maya MacGuineas, the group's president, said in a
statement.
Trump's plan relies on forecasts for economic growth of 3
percent a year by the end of his first term - well beyond Congressional Budget
Office assumptions of 1.9 percent growth.