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Thursday August 16th, 2018 2:16AM

Trump's $4.4 trillion budget moves deficit sharply higher

By The Associated Press
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WASHINGTON (AP) — President Donald Trump unveiled a $4.4 trillion budget for next year that heralds an era of $1 trillion-plus federal deficits and — unlike the plan he released last year — never comes close to promising a balanced ledger even after 10 years.

The budget submitted Monday shows the growing deficits despite major cuts for domestic programs, largely because of last year's tax overhaul, which is projected to cause federal tax revenue to drop. This budget does not yet reflect last week's two-year bipartisan $300 billion pact that wholly rejects Trump's plans to slash domestic agencies.

The president's budget proposes dramatic cuts to a wide range of domestic agencies from the Departments of Labor and Interior to the Environmental Protection Agency and the National Science Foundation. Unlike last year's submission, the 2019 Trump plan would cut Medicare by $554 billion over the next 10 years, a 6 percent reduction from projected spending, including cuts in Medicare payments going to hospitals and rehabilitation centers.

Presidential budgets are often declared dead-on-arrival in Congress where lawmakers have their own ideas about spending priorities. But the documents do represent the most detailed elaboration of an administration's priorities.

Tax revenue would plummet by $3.7 trillion over the 2018-27 decade relative to last year's "baseline" estimates, the budget projects. Trump is requesting a record $686 billion for the Pentagon, a 13 percent increase from the 2017 budget enacted last May.

In remarks Monday, Trump focused on the spending increases he favors rather than the deficits he and other Republicans have pledged to reduce.

"We're going to have the strongest military we've ever had, by far," Trump said. "In this budget we took care of the military like it's never been taken care of before."

Also getting a boost would be border security. Trump's budget includes money to start building 65 miles of border wall in south Texas as well as money to bring immigration jails up to a capacity of 47,000 and add 2,000 Immigration and Customs Enforcement employees and 750 Border Patrol agents.

The spending spree, along with last year's tax cuts, has the deficit moving sharply higher with Republicans in control of Washington. Trump's plan sees a 2019 deficit of $984 billion, though $1.2 trillion is more plausible after last week's budget pact and $90 billion worth of disaster aid is tacked on. That's more than double the 2019 deficit the administration promised last year.

All told, the new budget sees accumulating deficits of $7.2 trillion over the coming decade; Trump's plan last year projected a 10-year shortfall of $3.2 trillion.

"In one year of working together, we have laid the foundation for a new era of American greatness," Trump said in the budget message accompanying his spending document. "America is back to winning again. A great spirit of optimism continues to sweep across our nation."

The 2019 budget was originally designed to double down on last year's proposals to slash foreign aid, the Environmental Protection Agency, home heating assistance and other nondefense programs funded by Congress each year.

"A lot of presidents' budgets are ignored. But I would expect this one to be completely irrelevant and totally ignored," said Jason Furman, a top economic adviser to President Barack Obama. "In fact, Congress passed a law last week that basically undid the budget before it was even submitted."

In a preview of Monday's release, the White House on Sunday focused on Trump's $1.5 trillion plan for the nation's crumbling infrastructure. He also is asking for a $13 billion increase over two years for opioid prevention, treatment and long-term recovery. A request for $23 billion for border security, including $18 billion for a wall along the U.S.-Mexico border and money for more detention beds for detained immigrants, is part of the budget, too.

Trump would again spare Social Security retirement benefits as he promised during the 2016 campaign, though his plan would reprise last year's attempt to scuttle the "Obamacare" health law and sharply cut back the Medicaid program for the elderly, poor and disabled.

The plan also reprises proposals from last year's Trump budget to curb crop insurance costs, cut student loan subsidies, reduce pension benefits for federal workers and cut food stamps, among other proposals.

Mick Mulvaney, the former tea party congressman who runs the White House budget office, said Sunday that Trump's new budget, if implemented, would tame the deficit over time.

"The budget does bend the trajectory down, it does move us back toward balance. It does get us away from trillion-dollar deficits," Mulvaney said on "Fox News Sunday."

Last year, Trump's budget projected a slight surplus after a decade, but critics said it relied on an enormous accounting gimmick — double counting a 10-year, $2 trillion surge in revenues from the economic benefits of "tax reform." Now that tax reform has passed, the math trick can't be used, and the Trump plan doesn't come close to balancing.

Trump plan also promises 3 percent growth, continuing low inflation, and low interest yields on U.S. Treasury bills despite a flood of new borrowing, underestimates the mounting cost of financing the government's $20 trillion-plus debt. Many economists are likely to find the prospects for such a rosy scenario implausible.

The White House is putting focus this year on Trump's long-overdue plan to boost spending on the nation's crumbling infrastructure. The plan would put up $200 billion in federal money over the next 10 years to leverage $1.5 trillion in infrastructure spending, relying on state and local governments and the private sector to contribute the bulk of the funding.

Critics contend the infrastructure plan will fail to reach its goals without more federal support. Proposals to streamline the permitting process as a way to reduce the cost of projects have already generated opposition from environmental groups.

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