May 10, 2019

Yesterday, the nonpartisan Congressional Budget Office released its analysis of President Trump’s fiscal year 2020 budget request. In its top-level overview, CBO projects that over the coming decade, the President’s policies would result in federal spending being $2.3 trillion below its current “baseline” spending levels, while federal tax revenues would only be $882 billion below baseline. This would result in federal deficits being, collectively, $882 billion lower than the baseline over the coming decade.

However, many of the specific proposals are politically unlikely. Congress is unlikely to agree to reduce non-defense discretionary spending by an average of $104 billion per year over a decade (below baseline), as the President proposes, and they are even more unlikely to reduce funding for health care by an average of $148 billion per year. (The President’s plan to increase defense spending by $522 billion above baseline over ten years is more likely to be successful, but that would increase deficits, not lower them.)

CBO indicates that the $200 billion placeholder of mandatory budget authority in 2020 in the budget for an infrastructure initiative would “spend out” slowly only $114 billion in outlays over ten years, or a ten-year outlay rate of 57 percent.

On the revenue side, most of the $872 billion in costs of extending the 2017 tax cuts beyond their expiration in 2025 are more likely than not to happen, but the President’s other proposals are much less certain.

Highway Trust Fund. As part of that $1.044 trillion in holding down outlays from discretionary spending for ten years, the budget request called for flat-lining the spending authority for Highway Trust Fund accounts starting in 2021 at the 2020 levels, instead of letting them grow annually with inflation. (See Table 30-1 in the budget request for the year-by-year amounts starting on page 275.) The obligation limitation on federal-aid highways would be frozen at $45.1 billion per year; mass transit frozen at $11.5 billion per year, and so forth.

CBO has released a projection of HTF cash flow based under the President’s spending freeze. However, it takes a long time for the cash flow effects of the spending freeze to be noticed. (Tax receipts are unaffected by the President’s budget.) CBO (very unhelpfully) rounds its HTF cash flow estimates to the billion dollars, but here are the changes in cash flow caused by the President’s proposed spending freeze, compared to the May 2019 baseline:

As a result, the ten-year bailout cost of the Trust Fund would be $34 billion lower under the President’s freeze than it would be under the baseline. But a freeze starting in 2021 would not measurably affect the date at which the Trust Fund will next run out of money (summer or early fall 2021).