Five things to watch for in the Trump budget

All eyes will be on President Trump’s budget proposal on Tuesday when it is set for release.

Trump already made waves with the release of his budget outline in March, which called for massive cuts in discretionary spending in favor of defense.

The full budget is in many ways a political document, and Congress may do away with much of it as it works to fund the government.

Yet the document also lays out Trump’s agenda at a time when he is facing myriad controversies.

Here are five things to watch for.

How deep are the cuts and do they touch entitlements? 

The March outline laid out $54 billion in cuts from nondefense discretionary spending, slashing huge amounts from the State Department and EPA and eliminating funding for the National Endowment for the Arts and the Corporation for Public Broadcasting.

The full budget will provide more of the specifics of these cuts and lay out Trump’s plans for increasing spending on defense. It will also show whether Trump is sticking to his plan or backtracking after criticism.

Nondefense discretionary spending only accounts for about 16 percent of the budget, while cuts to Social Security and Medicare are much more effective ways to reduce deficits.

Trump promised during the campaign, however, that he would not touch those programs.

How will Trump pay for his tax cuts?

Trump is proposing tax reform that would slash corporate tax rates and business taxes.

The idea is to jump-start the economy, but the cuts will be projected to grow the deficit. A big question, as a result, is how Trump will propose to pay for the cuts.

Office of Management and Budget Director Mick Mulvaney has hinted that the budget will rely on assumptions of healthy economic growth rates, which the administration thinks it can achieve through tax cuts and deregulation.

More economic growth means more revenues and fewer expenditures on programs such as unemployment. But economists are wary of a budget written with rose-colored glasses.

“Clearly, the economic projections are important, because they will be tempted to do a rosy forecast,” said Alice Rivlin, an OMB director under former President Bill Clinton and a scholar at the Brookings Institution. “Administrations’ [forecasts] always are, but this one has said that they’re very growth-oriented and assuming higher growth levels.”

Trump vowed the nation would achieve 4 percent growth in his presidency, but over the last seven years the economy has only grown between 1.5 percent and 2.5 percent.

Even 3 percent annual growth could be a challenge with an aging population, and some economists say growth of 1.5 percent to 2 percent is the new normal given today’s low unemployment rate.

“To grow the economy by 3% annually, productivity growth, capital growth and prime-age labor force participation would all need to return to the levels of the booming 1990s—an unlikely scenario given recent trends,” the Committee for a Responsible Federal Budget (CRFB) said in a recent paper.

Will there be tax reform details?

Trump’s proposed tax overhaul was big on promises but light on details.

The administration hasn’t said how much it thinks its tax cut plan would cost, though the CRFB estimated the cost at $5.5 trillion over a decade.

It’s possible Trump will punt on some of the tough questions.

“There’s nothing that requires them to put a detailed tax reform proposal in,” said Rivlin. “They may do the tax and spending side together, or they could just do the spending side of the budget and do a global revenue estimate for the revenues.” 

Still, even a simple placeholder indicating how much overall revenue the administration expects to take in will offer some indication of the scope of its tax plans and lay out a revenue goal for the first time. 

How much does Trump want for the wall?

Democrats won a victory over Trump when they kept money for his wall along the Mexican border out of a short-term funding bill in early May.

They argue the wall is a waste of money and that there are better, cheaper ways of securing the border using technology.

It is estimated a wall along the border could cost between $21.6 billion and $70 billion, a price that Republicans would have difficulty swallowing. Trump has put the cost at between $4 billion and $10 billion.

Does it try to crash ObamaCare ?

There are two big healthcare questions that could be answered in the budget.

The first: What does the administration expect will happen with the American Health Care Act, the House legislation to repeal and replace ObamaCare?

The House bill was estimated to cut $150 billion in spending, which Republicans hope to use to offset the cost of tax reform.

But amendments added to the bill in the House are expected to make it more expensive, and more changes are coming in the Senate. The Congressional Budget Office has yet to score the House bill.

The budget will have to lay out some assumptions about the House bill’s cost. Will it assume the House bill is passed as is in the Senate, something no one thinks will happen? Will it assume some sort of compromise? Will its numbers differ from those of the Congressional Budget Office?

Democrats will be watching to see if the budget includes funding for cost-sharing reductions, a type of subsidy in ObamaCare that helps low-income people. Republicans have used the subsidies as a leverage point against Democrats and promised to keep them as part of the 2017 spending package approved earlier in the month.

“At a minimum the president’s budget reflects administration policy at this point, so a budget that shows spending on CSR payments continuing for the rest of fiscal year 2017 through fiscal years 2018 and 2019 would indicate that the administration’s policy is that it will continue making payments,” said Edward Lorenzen, a health expert at the CRFB.

But even that isn’t a guarantee, he added.

“There is nothing to prohibit [the Department of Health and Human Services] from deciding to stop payments in the future even if the budget assumes spending will continue,” he said.