Trump Budget 2020

The Trump administration has released its federal budget for 2020. The document lays out taxing and spending proposals and provides projections through 2029.

The chart compares Trump’s proposed revenues and spending to the most recent CBO projections. These are from CBO’s “alternative fiscal scenario” (AFS), which assumes that the Trump tax cuts do not expire after 2025 and that discretionary budget caps are lifted.

 

The Trump budget also assumes that the tax cuts do not expire. However, his budget is much more optimistic about economic growth than the CBO, and so estimated revenues are higher.

Note that the tax cuts went into effect in 2018 but federal revenues did not fall. Revenues would have been higher without the cuts, but rising deficits are being driven by relentless spending increases, not a shortage of revenues.

Even with the tax cuts in place, revenues are expected to rise from $3.5 trillion this year to $5.3 trillion in 2029 under the CBO projections. If we restrained annual spending growth to a reasonable 1.8 percent, the budget would be balanced in 10 years.

Federal Budget Outlook and Trump Tax Cuts

President Trump releases his budget for 2020 today. The budget includes major cuts to domestic programs to deal with rising deficits, which is a good approach because out-of-control spending is the core problem with federal finances.

Many people blame today’s high deficits on the Trump tax cuts. Pointing to growing red ink, the AP said yesterday, “Trump’s 2017 tax cut bears much of the blame, along with sharp increases in spending for both the Pentagon and domestic agencies and the growing federal retirement costs of the baby boom generation.”

The Trump tax cuts reduced revenues relative to what they would have been, but the cuts have not reduced overall federal revenues. According to the CBO, federal revenues were $3.32 trillion in fiscal 2017, $3.33 trillion in fiscal 2018, and an estimated $3.52 trillion in fiscal 2019. The tax cuts went into effect during fiscal 2018.

The tax scorekeeper of Congress estimated that the tax cuts would lose substantial revenues, particularly in the near term. But overall federal revenues have not fallen, and indeed are expected to grow strongly in coming years.

The chart below shows annual increases in total federal spending and revenues under CBO’s “alternative fiscal scenario.” The AFS assumes that a portion of the tax cuts do not expire after 2025 as scheduled, and that discretionary budget caps (currently in place through 2021) are lifted, which is likely.

Despite the tax cuts, you can see that 2018 revenues did not fall—they were roughly flat. And now in 2019 revenues are rising strongly and expected to grow at an annual average rate of 4.2 percent over the coming decade. Again, this is with the Trump tax cuts in place through 2029.

The problem is that spending is expected to grow even faster at a 5.4 percent average rate over the coming decade, according to the CBO. That is far above the expected inflation rate of about 2.1 percent in coming years.

As spending rises faster than revenues, deficits will soar. Under the AFS, the CBO expects annual deficits to climb from $0.9 trillion in 2019 to $2.2 trillion by 2029.

America is in the 10th year of economic expansion, so Washington should be running budget surpluses not pushing up deficits to record highs. In his new budget, Trump proposes some unaffordable defense and security spending increases. But he also proposes balancing the budget in 15 years with domestic spending restraint, which is a modest reform goal in the right direction.

House Passes Political-Omnibus Bill H.R. 1

H.R. 1, the political regulation omnibus bill, contains “provisions that unconstitutionally infringe the freedoms of speech and association,” and which “will have the effect of harming our public discourse by silencing necessary voices that would otherwise speak out about the public issues of the day.” Don’t just take my word for it; that’s the view of the American Civil Liberties Union, expressed in this March 1 letter (more). For example, the bill would apply speech-chilling new restrictions to issue ads by cause organizations, should they happen to mention individual lawmakers.

The House of Representatives nonetheless voted Friday along party lines to pass the bill, which was sponsored by Rep. John Sarbanes (D-MD). For now, it has no prospect of passage in the Senate.

The issues raised in the ACLU letter aside, H.R. 1 contains many other provisions that likely are unconstitutional, unwise, or both.  Colleagues Ilya Shapiro and Nathan Harvey enumerate some of them (“If ever adopted, [HR1] would give power to one slice of Washington’s elite at the expense of American democracy’s carefully crafted checks and balances”). More criticism: Brad Smith on the bill’s restrictions on discussion and coordination of expenditures on speech; David A. French (“At its essence, the bill federalizes control over elections to an unprecedented scale, expands government power over political speech, mandates increased disclosures of private citizens’ personal information (down to name and address), places conditions on citizen contact with legislators that inhibits citizens’ freedom of expression, and then places enforcement of most of these measures in the hands of a revamped Federal Election Commission that is far more responsive to presidential influence.”) 

On gerrymandering, an issue on which the Constitution does grant Congress a power to prescribe standards which I’ve argued it should consider using more vigorously, the bill takes the heavy-handed approach of requiring all states to create a commission of a certain format. Whatever the comparative virtues of one format or another, that would likely run into the Supreme Court’s doctrine against federal “commandeering” of state government resources. Electoral-process reform is an issue deserving of attention, but given its numerous infringements of individual rights and poorly thought out elements, this package doesn’t work even as a first negotiating position. [adapted from Overlawyered]

What Are the Costs of U.S. Troops Stationed Abroad?

In private discussions with his aides, President Trump has devised an eye-popping formula to address one of his long-standing complaints: that allies hosting U.S. forces don’t pay Washington enough money.

Under the formula, countries would pay the full cost of stationing American troops on their territory, plus 50 percent more, said U.S. and foreign officials familiar with the idea, which could have allies contributing five times what they provide.

This perspective seems backwards.

If stationing U.S. troops in, say, the Middle East prevents 9/11’s or other terrorist attacks against the U.S., then the direct expenditures is a small price to pay.

But if U.S. troops, bases, invasions, and occupations increase resentment of the U.S. and make attacks more likely, then any reduction in expenditure that keeps our troops abroad is penny-wise but pound-foolish.

Plus, a forward-deployed military posture has other costs, as detailed by Cato’s John Glaser here.

Determining the impact of our foreign interventions on terrorism is admittedly a difficult task.

But that is the crucial question; not whether we, or they, pay for the expenditure.

The Jones Act Fleet: High Costs and Limited Capabilities

Jones Act shipping is expensive. So much so that, as a new Cato Institute video points out, it actually competes with aircraft on the island of Hawaii for transporting cattle to the mainland. 

But the costly nature of Jones Act shipping is only one of the video’s key lessons. Another is the lack of appropriate ships to support such trade and the inefficiencies this creates. In a more economically rational world, Hawaiian cows would be sent to the West Coast aboard specially designed livestock carriers. 

But none exist in the Jones Act fleet, so ranchers in Hawaii make do with makeshift solutions such as using 747s or specialized containers placed aboard ships known as “cowtainers”—economic kludges not found anywhere else in the world. 

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Introducing America’s Nuclear Crossroads: A Forward-Looking Anthology

As the United States adjusts to a changing global balance of power, nuclear deterrence is poised to return to a level of importance in U.S. national security not seen since the end of the Cold War. However, U.S. nuclear strategy will have to contend with emerging issues like arms control in a multipolar world, the evolution of strategic technology, and the new contours of great power competition.

America’s Nuclear Crossroads, a forthcoming anthology from the Cato Institute, is a useful reference tool for policymakers as they navigate an increasingly complex nuclear security environment. We are pleased to present three advance chapters from the anthology examining the U.S. nuclear modernization plan, missile defense’s impact on nuclear stability, and the challenges posed by Iran and North Korea. 

The full anthology will be released later this spring. To view a digital copy of the three preview chapters and fill out a form to receive email updates about the project, including notification of the full publication and information about anthology-related speaking events, please visit https://research.cato.org/americas-nuclear-crossroads

Bump Stock Ban Bumps Up Against the Constitution

After the tragic mass shooting in Las Vegas, the phrase “bump stock” entered the public lexicon. What was, and always has been, a gun-range novelty was suddenly the subject of national discussion. In the months following the tragedy, Congress considered and ultimately rejected a law banning these devices. Eager to seize political capital, however, the Trump administration sought to ban them anyway.

The administration faced one problem, though: the Constitution. As anyone who’s seen School House Rock can tell you, only Congress has the ability to write new laws. So the administration attempted to give itself such a power by “reinterpreting” an existing law: the National Firearms Act of 1934 (NFA), which heavily regulates “machineguns.”

For decades, Congress, the executive branch, and the people shared a common understanding: the definition of “machinegun” in the NFA was clear, applying only to weapons that fired continuously from a single function. Bump stocks, which require substantial user input to fire, had never been considered “machineguns,” with precedent spanning multiple administrations. President Trump announced that his administration was changing course. The president expressly declined to go through Congress, instead directing officials to redefine bump-stock devices as “machineguns.” In turn, the Bureau of Alcohol, Tobacco, and Firearms (ATF) broke from decades of precedent and granted itself a new power to ban a widely owned firearm accessory.

This expansion of regulatory authority, motivated by political expediency, cannot stand. Whether one agrees that bump stocks should be regulated or not, this change is not limited to a ban on bump stocks. ATF has asserted the complete authority to ban any new class of weapons that federal law did not address. This approach impermissibly expands the executive branch’s power to rewrite criminal laws and threatens to stifle new developments in firearm technology.

The new rule, making felons of an unknowable number of Americans, was set to take effect March 21. To prevent this, a group of Second Amendment organizations filed a lawsuit in federal court. They sought a preliminary injunction to stop the government from enforcing the new rule, but were denied. Because the effective date is so close, the appeal to the U.S. Court of Appeals for the D.C. Circuit was expedited. Cato filed a brief addressing issues that no other amicus discusses: that the executive branch cannot use the administrative process to accomplish legislative goals that Congress declined to enact.

The implications of this case extend far beyond bump stocks. Regardless of what public opinion is at this moment, the law means what it says. The executive branch has the power to interpret existing law, not write new ones. The administration argues, essentially, that because the statute did not provide a separate definition of the terms that make up the definition of “machinegun,” that it gets to insert their own meaning. That simply isn’t the case. Administrative interpretations are supposed to do just that—interpret existing law—not give new meaning to an old one.

If the government really wants to regulate bump stocks, it needs to do so by passing a new law, not by assigning new meaning to an old one. The Founders weren’t short-sighted; there’s a reason laws that affect the entire nation have to come through Congress, not through bureaucratic reimagination.

The D.C. Circuit hears argument in Guedes v. BATFE on March 22.