In President Trump’s Budget Proposal, Two Steps Forward and Two Steps Back
March 21, 2017
The first installment of the President’s 2018 budget, released last week, is shock therapy designed to shake up the moss-covered bureaucracy of Washington DC. Cutbacks, totaling $54 billion dollars for fiscal year (FY) 2018, will target the plethora of interest groups that have been feeding at the federal trough for years. These broad-based spending reductions are a sharp departure from the fiscal imprudence of the Obama and Bush eras. But as per usual in Washington DC, two steps forward are followed by two steps back. In this case, the $54 billion in spending reductions are accompanied by $54 billion in (mainly) defense-related funding boosts. Below are the best and worst of President Trump’s proposed budget changes, along with their fiscal impact for the coming year. The outlined cuts have attracted little press, but demonstrate a real willingness to curb an omnipotent government. As the spending increases show, though, real budget reform is not quite here.
Two Steps Forward
- Elimination of the U.S. Department of Agriculture’s (USDA) Water and Wastewater loan and grant program ($498 million decrease)
The USDA regards the shortage of sanitized water in rural areas as a dire situation, and has used loans and grants to assist communities in procuring their own treatment systems. While their goals are laudable, the program maintains a misguided focus on public sector treatment. Local government grant/loan beneficiaries have little incentive to control costs, with cost-overruns being a regular feature of public sector water projects. Moreover, public players in the water industry have little incentive to control chlorine contamination. Chlorine leaks from treatment plants have led to millions of dollars in economic costs over the past decade alone. As the EPA points out, most industry participants have little incentive to deal with the risk posed by these leaks, and have underinvested in prevention strategies. Allowing the private sector to develop treatment plants in rural areas would mitigate this issue, by introducing companies that stand to lose market share from chlorine leaks and costly water treatment.
- Elimination of the U.S. Department of Commerce’s (DOC) Economic Development Administration ($221 million decrease)
The DOC has long touted their Economic Development Administration (EDA) as a potent job creator, funneling investment to businesses and projects in underserved areas. In a 2006 report, the EDA claimed an astounding $31 in private investment generated for every $1 spent by the administration. This is hard to reconcile, though, with any real-life insight into the workings of the EDA. Boondoggles such as a $200,000 reconstruction of the Egyptian pyramid of Cheops in Bedford, Indiana remind us that the government gets downright weird when given an expansive mandate and unlimited taxpayer dollars. The Government Accountability Office (GAO) has long called into question the merits of EDA projects, finding widespread duplication and program ineffectiveness. Over three-quarters of “enterprise projects” targeted toward Native American tribes were found to be losing money in a 2004 GAO review. Additionally, 86 federal commissions and agencies across the federal government are already doing similar work to the EDA. Clearly, then, the elimination of the administration is an unqualified success for taxpayers.
Two Steps Back
- Construction and modernization of additional Army Apache and Blackhawk helicopters, F-35 and F/A 18 fighter jets, tactical missiles and unmanned aircraft, and Terminal High Altitude Area Defense interceptors, and the DDG-5 destroyer ($13.5 billion increase)
While military leaders have long warned of the dangers of sequester-level funding on military readiness and performance, the case for funding hikes remains dubious. The President’s requested military appropriations would bring funding back up to 2012 levels, when US presence in Afghanistan was near peak levels. Given a current lack of nation-building operations, and a dearth of major-power adversaries, there seems little basis for an aircraft modernization slush fund. Advocates of increased military funding point to China as a large power with a potential to cause regional havoc if left unchecked. If anything, though, China’s dominance has been centered on naval might. It is a counterproductive use of taxpayer funds, then, to focus on constructing and modernizing new aircraft. Finally, taxpayers should be wary of the massive cost overruns that often come with aircraft development at the Pentagon. The F-35 program is particularly problematic, with projected per-plane costs nearly quadrupling over the past two decades. If the F-35 debacle has taught us anything, it’s that the government shouldn’t be throwing money into a fiscal black hole absent stringent verification.
- Boost to the Planetary Science program, including additional funding for Europa mission and Mars rover launch ($270 million increase)
As TPA has written previously, there’s little reason for boosting NASA funding. The private sector has a long history of bankrolling planetary science research, and would likely proliferate absent government financing. It’s easy to forget that, prior to government involvement in R&D, mammoth philanthropic organizations such as the Rockefeller Foundation funded ground-breaking research into particle collision, stellar formation, and DNA before government involvement in research and development (R&D). Furthermore, NASA’s planetary exploration activities are rife with cost-overruns. NASA missions regularly experience cost overruns north of 20 percent, with Discovery and Mars Scout programs among the biggest offenders. Despite assertions that cost-overruns have decreased in recent years, the Government Accountability Office already sees warning signs of overrun in NASA’s current projects. President Trump can shield taxpayers by scaling back publicly-funded planetary exploration.
President Trump should be applauded for shaking up the status quo in Washington, D.C. and scaling back government in his budget proposal by targeting a wide variety of areas with ample history of fiscal abuse and mismanagement. But politics is a frustrating art, and monumental progress is often coupled with large setbacks. As long as the constant tug-of-war between interest groups continues, American citizens will be on the hook for hundreds of billions of dollars in questionable federal expenditures. President Trump can fight more effectively for taxpayers by making consistent cuts across the federal budget.