WASHINGTONPresident Trump is expected to release a $4.8 trillion budget Monday that charts a path for the start of a potential second term, proposing steep cuts to social-safety-net programs and foreign aid and higher outlays for defense and veterans.The plan would increase military spending 0.3%, to $740.5 billion for fiscal year 2021, which begins Oct. 1, according to a senior administration official. The proposal would cut nondefense spending by 5%, to $590 billion, below the level Congress and the president agreed to in a two-year budget deal last summer.A White House budget reflects an administrations priorities and represents the opening bid in spending negotiations for the next fiscal year. The new budget is unlikely to become law, however, as Democrats control the House and spending bills in the GOP-led Senate need bipartisan support.
This year, the budget also reveals Mr. Trumps fiscal policy objectives should he win reelection in November, and his campaign messaging will likely reflect its broad strokes. The presidents aides have been meeting since late last year to craft a second-term agenda.
Among the agencies that would receive the biggest boost is NASA, which would see a 12% increase next year as Mr. Trump seeks to fulfill his goal of returning astronauts to the moon by 2024. On the other hand, the Environmental Protection Agencys spending would be slashed by 26%.
The plan would request $2 billion in new funding for construction of the wall the southern U.S. border, the senior administration official saidMr. Trumps signature 2016 campaign promise that sparked fights with Democrats in Congress, leading the president to trigger a historic five-week government shutdown last winter after lawmakers refused to fund the project. The latest $2 billion request is significantly less than the $5 billion the administration sought last year.
The White House proposes to cut spending by $4.4 trillion over a decade. Of that, it targets $2 trillion in savings from mandatory spending programs, including $130 billion from changes to Medicare prescription-drug pricing, $292 billion from safety-net cutssuch as work requirements for Medicaid and food stampsand $70 billion from tightening eligibility access to federal disability benefits.
In campaigning for the White House Mr. Trump had promised voters he would protect funding for Medicare and Medicaid. His new budgets proposals to find savings through changes to those programs reflect longstanding GOP efforts to reduce federal safety-net spending, and come a week after all but one Republican senator voted to acquit the president of impeachment charges passed by House Democrats.
The budget assumes the $1.5 trillion tax-cut package enacted in 2017, set to expire by 2025, is extended, and projects revenues in line with last years proposal. It also expects economic growth will be faster than most economists predict if the presidents policies are implemented.
The White House projects the economy will grow 3.1% in the fourth quarter of 2020 compared with a year earlier, and 3% in 2021, and that it will continue to expand at that pace for the rest of the decade. But the administration expects year-over-year growthcomparing total GDP for the yearto be slightly lower in 2020 than it forecasted last year, the senior administration official said, echoing Treasury Secretary
Steven Mnuchin
last week.
In his State of the Union address last week, Mr. Trump touted the strength of the economy, foreshadowing a central theme of his reelection campaign.
We are moving forward at a pace that was unimaginable just a short time ago, and we are never going back, he said.
After a brief pickup in 2018, however, growth last year settled back to the roughly 2% pace that has prevailed during the decade since the last recession ended, where many economists expect it to remain. At the same time, unemployment has fallen close to a 50-year low.
The federal budget deficit would shrink to $966 billion next year from an estimated $1 trillion in 2020. The administration forecasts an end to annual deficits by 2035. During his 2016 campaign, Mr. Trump discussed paying off the federal debt within eight years.
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Though Mr. Trumps budget officials have pushed routinely for spending cuts to reduce deficits, the president has reached two separate agreements with congressional Democrats to boost spending above limits set in 2011.
Meanwhile, tax cuts enacted in 2017 have reduced government revenues as a share of economic output, pushing deficits as a share of GDP to 4.7%, well above the 2.7% average over the past 50 years.
The administration forecasts the 10-year Treasury yield, which reflects the cost of government borrowing to finance the deficit, will average 2% in 2020 and rise gradually over the next decade, well below the rates forecast in last years budget. The change reduces projected net interest costs by $600 billion over the next decade.
In his third State of the Union speech, President Trump struck an upbeat note, touting economic achievements such as rising wages and declining unemployment. Photo: Getty Images
Winners in Mr. Trumps budget include the Department of Veterans Affairs, with a 13% increase next year, and the Department of Homeland Security, with 3%. The National Nuclear Security Administrations budget would get a 19% boost.
On the other hand, the Department of Housing and Urban Developments budget would be cut by 15%, although the proposal includes $2.8 billion in homelessness assistance grants. Mr. Trump has repeatedly criticized Democratic-led cities, saying they have failed to address homelessness.
The Commerce Departments budget would be reduced by 37% from 2020, but officials said much of that cut can be attributed to the completion of the census. Foreign aid would be slashed by 21%.
The Centers for Disease Control and Prevention would see its budget decline 9%, but with the coronavirus sparking global panic, $4.3 billion in funding for fighting infectious diseases would be preserved.
Separately, the administration has notified Capitol Hill that it might reprogram $136 million in funds from fiscal year 2020 to address the virus, the administration official said, though no decision has been made on whether the money is needed.
The budget also proposes moving the U.S. Secret Service from DHS to the Treasury Department, in a win for Mr. Mnuchin, who has pushed for such a move. The change would require congressional approval.
Security assistance to Ukraine would remain at current levels following Mr. Trumps decision last summer to suspend congressionally approved aid as he pushed the country to investigate 2020 Democratic candidate
Joe Biden,
an episode at the center of the impeachment saga.
The budget eliminates funding for the Yucca Mountain Nuclear Waste Repository in Nevada. Mr. Trump has said he hopes to work with state politicians, who widely oppose the repository, on an alternative. Nevada is a battleground state in the coming presidential election.
Write to Kate Davidson at kate.davidson@wsj.com and Andrew Restuccia at Andrew.Restuccia@wsj.com
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