The Fiscal Month in Review: Questions about Policy Specifics Remain

President Trump delivered his first address to a joint session of Congress on February 28. In a statement on the president’s address, Michael A. Peterson, president and CEO of the Peter G. Peterson Foundation, said:

“President Trump outlined a range of policy priorities for the country, but an opportunity was missed to highlight the importance of addressing our national debt. . . . As our leaders consider reforms in key areas such as healthcare and tax reform, we must enact policies that also improve our nation’s fiscal outlook. Looking ahead, the President and Congress have the opportunity to work together to stabilize our debt and provide a strong foundation for economic growth."

Trump’s first budget, which will be a topline (or “skinny”) budget, is expected on the Hill the week of March 13. The president’s budget kicks off the annual budget process, and the first budget proposal from a new president is always eagerly anticipated as a tangible sign of how a new administration will attempt to translate campaign promises into actual policy.

Trump outlined some broad strokes of his budget proposal on February 27, but lawmakers and voters are anxious to see where the administration stands on a number of key budgetary issues:

• The Affordable Care Act: Republicans remain divided over how dramatic the overhaul to Obama’s signature healthcare law will be. An early outline of a potential replacement plan that was circulated this month included a provision for a refundable tax credit, among other provisions that have important fiscal implications.
• Tax reform: While lawmakers widely agree on the need for tax reform there has been significant debate about the details. Speaker Paul Ryan has proposed a border adjustment as a key part of a corporate tax overhaul. Thus far, Trump has sent mixed signals about his support for the House plan.
• Discretionary spending: Administration officials have said that Trump’s first budget will call for a 10% increase in defense spending, as well as boosts to law enforcement and infrastructure spending. Officials have suggested that funding for this increase would come from other programs funded by discretionary spending, with the State Department and the Environmental Protection Agency expected to face the steepest cuts.

Despite the political uncertainty, the economy continues to make steady economic gains. The Fiscal Confidence Index for February was 60, returning to the same level as December, after a brief uptick in January.

Photo credit: Michael Vadon