Trump Unveils FY21 Budget, Cuts CFATS, Inland Waterway Funding

President Trump on February 10 released his administration’s proposal for the 2021 federal budget. In the $4.8 trillion so-called “skinny budget,” the White House is proposing to Congress a slight increase in defense spending while requesting that non-defense spending, which includes welfare programs, foreign aid and environmental programs, be cut by 6%. The proposal has angered Democrats and even some Republicans, who agreed in September 2019 to a bipartisan two-year budget deal.

The President’s budget is an initial proposal given to Congress by the administration. It lays out Trump’s spending priorities for the 2021 fiscal year that begins October 1, 2020. Budget proposals like this one, released by the President regardless of political party, are more of a political statement than an actual proposal that Congress must consider. While the President has his spending priorities and can certainly influence the process as he has the final say on whether to sign spending bills, the main work of the appropriations process is done through the House and Senate Appropriations and Budget committees.

The contents and timing of the proposed budget were surprising for numerous reasons. While President Trump called for a 0.3% increase in defense spending to $740.5 billion, he also called for a 6% reduction in domestic non-defense spending to $590 billion. This reduction includes the following cuts:

• Elimination of all funds for the CFATS program
• $0 for Inland Waterways construction projects
• Cuts in Medicare of $130 billion over a decade
• Cuts in safety-net programs like Medicaid and food stamps of $292 billion over a decade
• 21% cut in foreign aid to $44.1 billion
• 27% cut in funding for the Environmental Protection Agency (EPA)
• 29% cut in funding for the Department of Energy

8% cut in funding for Department of Education, including the cancellation of $3.9 billion surplus of the Pell Grant program

The Waterways Council Inc. expressed distress at the lack of dollars for inland waterways. The group said there was zero funding for construction of ongoing priority navigation projects cost-shared through the Inland Waterways Trust Fund (IWTF); that the proposal cuts funding for the U.S. Army Corps of Engineers’ Civil Works mission by 22% ($5.9 billion, a $1.7 billion decrease from the FY20 enacted level); and it proposes $1.8 million in new user fees on commercial waterways operators.

“WCI is extremely disappointed and absolutely astonished at no investment in rebuilding the nation’s critical inland waterways transportation system,” WCI President and CEO Mike Tooey said in a statement. “No president has ever proposed zero infrastructure investment. Are we to lay off the workers constructing the projects now underway? Where is the 29-cents-per-gallon fuel tax money that users pay going, while the administration seeks $180 million in additional annual fees with no plans to spend it? Where is the shame?”

The budget specifically proposes to zero out the budget for the Chemical Facilities Anti-Terrorism Standards and recommends that the Department of Homeland Security make the program voluntary.

Trump’s budget proposal calls for a 13% increase in funds for the Department of Veterans Affairs and a 12% increase in funds to NASA. The administration claims that the budget proposal would eliminate the federal deficit in 15 years, a deficit that is expected to reach $1 trillion in fiscal year 2020 for the first time since 2012. However, this is contingent on average economic growth of 3% per year during that time span, a target that has not been hit once during the Trump Administration.

The release of the President’s budget also contradicts an agreement made by Trump and Congressional Democrats and Republicans in the summer of 2019 that set forth a two-year budget lasting until September 2021. House Budget Committee Chair John Yarmuth (D-KY) criticized the plan by stating that "Just six short months ago, the President signed a bipartisan two-year budget deal into law but now, the President is apparently going back on his word." The committee chairman continued that “Instead, he is proposing deep cuts to critical programs that help American families and protect our economic and national security."

The timing of the proposed cuts in Medicare and Medicaid are politically risky, as this is a re-election year and the two programs are immensely popular with the public. As a practical matter, President Trump has never sought to rein in spending and the combined deficits since he assumed office in 2017 have risen by $3 trillion. Budget estimates predict that the 2020 deficit will be more than $1 trillion and remain at that level until 2030, which is as far as the prognosis goes.

Economists both inside and outside the government are beginning to warn that this level of deficit is unsustainable and will become a serious drain on the economy. Trump’s long-term budget prognosis does not predict a balanced budget until at least 2030, and this is predicated on a series of very large cuts to foreign aid, housing, Medicare, Medicaid and the EPA that Congress is very unlikely to enact.