Last month, President Trump released a $4.75 trillion budget proposal, the largest in federal history. The proposal calls for steep cuts to domestic programs spanning education, health care, and the safety net while calling for a 4.9 percent increase in defense spending.
The proposal seeks to reduce the deficit, claiming it will accomplish this mainly through domestic spending cuts and forecasting aggressive economic growth, which boosts tax revenue.
This projected economic growth is one of three assumptions behind the administration’s proposal. Urban Institute researchers help illuminate these assumptions and how proposed cuts to safety net programs could affect the lives of Americans who rely on them.
Assumption 1: The economy will grow at a consistent 3-percent pace
The proposal forecasts an economic growth rate of 3 percent, which is contingent on making the Tax Cuts and Jobs Act permanent, passage of an infrastructure bill, and deregulation of the financial sector.
If the picture of economic growth becomes less rosy, as it is for the Congressional Budget Office, the justification for the 2017 Tax Cuts and Jobs Act, which benefits wealthy Americans the most, may fall into question.
“This concern with a growing deficit and blaming it on the spending side, especially after passing large tax cuts, seems very unfair,” said Kim Rueben, a senior fellow at Urban. “Yes, the economy is doing well. But even if you think some of that growth is related to the tax bill we just passed, you can’t ignore that it’s also contributing to a large increase in the deficit.”
Assumption 2: The War on Poverty has been won
The budget proposal calls for steep cuts and restrictive changes to safety net programs like Medicaid and the Supplemental Nutrition Assistance Program (SNAP).
The administration may justify these cuts with the idea that these programs aren’t as needed as they once were. Last year, the president’s Council of Economic Advisers (CEA) declared that the War on Poverty, first announced by President Johnson in 1964, had been won.
The CEA arrived at this conclusion by using a consumption-based poverty measure that counts what a family consumes instead of how much income it earns. The CEA credits SNAP and Medicaid, the same programs the administration proposes cutting, with helping to reduce poverty by this measure.
Stephen Zuckerman, one of Urban’s vice presidents of health policy, noted how the proposal would affect the health care system. “What I see across this proposal is an administration attempting to accomplish what Congress didn’t in their attempt to repeal the Affordable Care Act,” he said.
Among many provisions, Zuckerman pointed to the proposal to give states the option to transform Medicaid into a block grant system indexed by the Consumer Price Index for All Urban Consumers (CPI-U) which grows at a much slower rate than health care spending.
“The proposal would also make work requirements in Medicaid mandatory,” Zuckerman said. “In one state, work requirements have already reduced coverage among people subject to them.”
Assumption 3: Work requirements help people find economic security
Heather Hahn, a senior fellow at Urban, elaborated on the rollout of Medicaid work requirements in Arkansas. “Arkansas was first state to implement new work requirements, and thousands of people are losing coverage,” she explained.
The people subject to work requirements are often in favor of them, according to Hahn, but the requirements’ success depends on a lot of “ifs”: “If there are jobs available, if workers have the skills to get jobs, and then if people are working, if they can successfully navigate the red tape of reporting and getting accepted, which is kicking many people off.”
Margaret Simms, a nonresident fellow at Urban, also remarked, “Many people already have jobs, or they simply can’t find work. We aren’t talking about moving toward a more equitable society. We’re talking about moving away from one.”
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Higher education may be a bright spot for bipartisan cooperation between the administration and Congress, especially as Congress begins to consider reauthorizing the Higher Education Act.
Yet spending for the Department of Labor and job training programs, like Jobs Corps, face cuts in the administration’s budget proposal. At the same time, the administration has also demonstrated strong support for apprenticeship programs, which can help workers gain skills in the private and public sectors.
The debate surrounding these assumptions can affect the well-being of millions of Americans and the role research organizations can play in the process.