February 12, 2018

President's 2019 Budget: By the Numbers


Key Takeaways

  • The budget proposal fully funds U.S. defense needs with $716 billion, as articulated in the increased defense spending caps in the Bipartisan Budget Act of 2018.
  • The budget proposal predicts strong economic growth from tax cuts and other pro-growth policies: annual real growth of 3 percent or more from 2018 through 2024.
  • Spending in fiscal year 2019 would total $4.4 trillion.

The president’s fiscal year 2019 budget proposal was released today. It includes proposals for discretionary spending in fiscal year 2019 as well as savings in mandatory spending. Because the budget proposal was finalized before passage of the Bipartisan Budget Act of 2018, the president's budget was written based on the earlier spending caps.

Since the 2018 BBA increased both defense and nondefense caps, OMB Director Mick Mulvaney provided an addendum outlining how to responsibly spend some of the increased nondefense spending cap and to adjust some of the defense “overseas contingency operations” funding. In addition, Director Mulvaney advocates for using some of the increased nondefense cap to eliminate many changes in mandatory spending programs – “CHIMPs” – in appropriations bills. Director Mulvaney said that the addendum would use $17.7 billion of the increased nondefense spending cap to eliminate all but a “handful” of CHIMPs.

Defense Discretionary

The president’s budget includes $716 billion for defense activities (defined as budget function 050, which includes some other departments, notably Department of Energy nuclear weapons activities). Of this total, $686 billion is for the Department of Defense. The $716 billion is identical to the level provided for in the BBA, including OCO. The addendum letter shifts $20 billion of OCO funding to the base defense budget.

Nondefense Discretionary

The president’s budget includes $540 billion in nondefense discretionary budget authority, which is $57 billion below the 2019 BBA cap. The pre-BBA budget’s numbers show that nondefense discretionary outlays decline from $626 billion in 2019 and eventually reach $436 billion in 2028. The budget proposes savings and reforms to nondefense discretionary spending totaling $48.4 billion in fiscal year 2019.

The budget proposal would lower discretionary spending by $1.5 trillion over 10 years, the bulk of which is achieved by implementing a “two-penny plan” – proposed in the 2018 budget as well – that would lower nondefense discretionary spending by 2 percent per year.

Mandatory Spending and Revenues

The budget proposal would save nearly $1.8 trillion over 10 years through various mandatory spending and receipt proposals. The single largest of these is to repeal and replace Obamacare, which would save $675 billion over 10 years.

Even with strong predictions for economic growth, America’s largest entitlement programs would continue to grow as a percentage of the economy. Social Security would go from 4.9 percent of GDP in 2018 ($987 billion) to 5.4 percent in 2028 ($1.75 trillion). Medicare would go from 2.9 percent of GDP in 2018 ($582 billion) to 3.9 percent of GDP in 2028 ($1.26 trillion).

Economy

The budget includes economic assumptions as well. Gross Domestic Product is predicted to grow by at least 3 percent per year from 2018 through 2024. It would decline slightly to 2.9 percent in 2025 and 2.8 percent in each year from 2026 through 2028.

The budget predicts an unemployment rate of 3.9 percent in 2018, 3.7 percent in 2019, and remaining below 4 percent until 2022. The rate will then gradually increase, reaching 4.8 percent in 2028. The unemployment rate is currently 4.1 percent. All economic numbers are in calendar years.

Deficits and Debt

The administration’s original fiscal year 2019 budget predicted a deficit of $984 billion for fiscal year 2019 and $987 billion for 2020. Beginning in 2021, the deficit would decline, reaching $445 billion in 2028, or 1.4 percent of GDP.

The gross national debt would grow to nearly $30 trillion in 2028, or 92 percent of GDP. Debt held by the public would increase from $14.7 trillion in 2017 to $23.7 trillion in 2028, but it would decline as a percentage of GDP, from 76.5 percent of GDP in 2017 to 72.6 percent in 2028.

Issue Tag: Senate