President Donald Trump's proposed budget for fiscal year 2018 released Tuesday calls for increased spending on the military and infrastructure, paid for by tax reform, regulatory rollbacks, reduced non-defense spending and cuts in federal employee retirement benefits.
Revenue projections to have a balanced federal budget within 10 years are based on 3% annual growth in the economy, in contrast to the Congressional Budget Office's projection of 1.9%.
The proposed budget also calls for additional premiums paid to the Pension Benefit Guaranty Corp. by underfunded multiemployer pension plans by adding a variable rate premium and exit premiums similar to existing rates for single-employer plans. The changes are projected to raise an additional $16 billion to keep the multiemployer program solvent for the next 20 years, plus another $5 billion that would come from having multiemployer plans pay premiums faster, so that they fall within the 10-year federal budget window. Adding these new premiums would require legislation.
Some of the revenue raisers in the proposed budget would help finance an infrastructure initiative budgeted for $5 billion in the first year, and $200 billion total through fiscal 2027. The administration will propose additional funding focused on incentives for private investment, according to the budget document.
Federal retirement costs for employees would increase under the proposal, with benefits based on a worker's last five years instead of three, and workers sharing half the cost of defined benefit contributions with employers. Cost-of-living increases would be reduced or eliminated. The changes are aimed at bringing the federal government in line with private-sector companies, which the budget notes “are providing less compensation in the form of retirement benefits.”
On tax reform, the president calls for a lower individual rate and protecting deductions for retirement savings, while business tax rates would be lowered and special interest tax breaks eliminated. That reform could reduce taxes on upper-income families, which would place the burden of reaching a balanced budget through federal spending cuts of programs primarily benefiting low- and middle-income recipients, said G. William Hoagland, senior vice president at the Bipartisan Policy Center in Washington. “Many of these programs need reform, and the goal of reducing public debt is laudable, but there is a level of unfairness in the president's budget proposal that would be devastating to low-income families and states struggling to provide critical public services.”
Mr. Hoagland called the president's budget “just the opening bid in what will be a very contentious debate over the next several months on the budget and other competing priorities.”
The president's budget does not cover the Securities and Exchange Commission and the Commodity Futures Trading Commission, which submit their own budgets.
SEC funding, which does not affect the federal budget because it is offset by transaction fees, would remain unchanged from the current $1.6 billion level and keep the current hiring freeze. It calls for continued access to a Reserve Fund to finance information technology improvements, but the president's budget would eliminate that fund by 2027.
CFTC officials called for $31.5 million in additional funds to implement its fintech initiative, perform more cost-benefit analysis and oversee swaps clearing organizations.