What is the President’s Budget Request? Yesterday, the Trump Administration submitted its formal budget request for fiscal year (FY) 2021 to Congress. While Congress holds the power of the purse, historically the President’s budget request kicks off the congressional budget process in both the House and the Senate, serving as a starting point for lawmakers to determine funding levels and national spending priorities.
Tomorrow, February 12th, the House Budget Committee will welcome Office of Management and Budget Acting Director Russell Vought to testify on the administration’s budget proposal: A Budget For America’s Future. Key components include:
Deficit Reduction. Under the President’s proposal, deficits as a share of gross domestic product (GDP) decline from 4.9 percent in 2020 to 0.7 percent in 2030 – a $4.6 trillion reduction.
Defense and Non-Defense Discretionary Spending. For FY 2021, the President’s budget adheres to the Bipartisan Budget Act of 2019 (BBA 2019) spending cap for base defense spending and is below the BBA 2019 cap for base non-defense spending. Including requested funding for Overseas Contingency Operations (OCO), total defense spending is $741 billion in FY 2021. Base non-defense discretionary spending is $590 billion, which is $37 billion below the cap level.
Mandatory Savings. Mandatory spending today accounts for 70 percent of all federal spending and is the biggest driver of our nation’s deficits and debt. The President’s request would achieve approximately $2.5 trillion in savings from mandatory spending proposals. These include: increasing state innovation in Medicaid, addressing high drug prices in Medicare, and reforming the welfare system, federal student loan programs, and federal employees’ benefits.
Revenues. The President’s budget assumes revenue levels increase from $3.7 trillion in 2020 to $6.4 trillion in 2030. The budget also assumes extension of the expiring provisions in the Tax Cuts and Jobs Act.
Economic Assumptions. The administration projects real growth in GDP to average 2.9 percent annually over the next decade. The budget’s pro-growth policy assumptions, including regulatory reform and the extension of the Tax Cuts and Jobs Act, are primary contributors to this growth, which is similar to the long-term average rate of growth of the U.S. economy.