Economic Implications of President Trump's Proposed Budget for America

by Ben B.Boothe, Sr. | ‎Friday, March 24, 2017, 5:48 PM (CDT)

A national budget is a way of interpreting political direction and motives in an economic way. I have organized, founded and managed banks. Let me assure you that economists and bankers know that a clear way to get to know a customer, company, or nation that wants to borrow money is to learn to read the client's "budget" and financial projections like a book. We have been reading President Trump's proposed budget and find it the most revolutionary document that has been presented by an American president in nearly a century. It has more profound implications for our economy, our society and how we may be governed than anything Trump has done, said or tweeted. Now, this budget is not yet approved or implemented. No doubt there will be thousands of Americans and airplanes filled with businessmen, politicians and lobbyists coming to D.C. to change it, to protect their special interests. But with Republicans controlling both the House and the Senate, much of this budget could be approved. You need to be aware of what is in this budget and the implications for your business, family, town, state, and, of course, the nation.

The good thing about reading numbers is that it filters out much of the emotional knee-jerk reactions out of a conversation. So let us take a look at some of the things the budget numbers tell us that this administration wants to do.

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1. THE PROPOSED PRESIDENT TRUMP BUDGET CUTS $119 BILLION +/- FROM DISCRETIONARY SPENDING. From this, you might get the impression that it is saving money and balancing our budget. But look carefully at the details and below the surface. It is written to "appear" to save taxpayers money. The devil is in the details.

2. But then the Trump Budget takes $60 billion of that money that he took from local schools, farmers, commerce, industry, states, infrastructure -- from your town and cities, health and transportation -- and the budget increases spending on military, veterans and homeland security. $60 + billion we thought was saved, was spent elsewhere.

3. The budget virtually forces local towns, cities, counties, and states to raise taxes because it transfers the U.S. Government burden and obligations to heartland communities. Heartland can't afford it, and thus will have to raise local taxes. We estimate that your taxes will increase nationally by an estimated $58 billion, not to mention the local costs for infrastructure, highways, bridges and airports that the federal government will no longer be willing or able to pay for. Infrastructure spending seems to be left out of this federal budget, thus it is left to the heartland. Unfortunately, much infrastructure is federal property, so another conundrum: how do towns, cities and states deal with crumbling interstate highways, railways and airports?

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The budget cuts more than $119 billion from established programs that have helped stabilize and govern the USA for nearly 100 years. Yet, by our estimates, there are no net savings to the American people, and let us explain why. This budget is like a slight of hand, or a Ponzi scheme. Because your rising state and local taxes (our taxes) and other expenses to cover the expenses that the federal government will stop covering, will equal or exceed the budget cuts.

THIS BUDGET IS LIKE A CIRCUS "WHICH-HAND-HOLDS-THE-COIN" GAME. YOU CUT EXPENSES ON ONE SIDE BY TRANSFERRING THE BILLS TO THE STATES, COUNTIES, CITIES AND AMERICAN PEOPLE.

Just look at the budget, the real numbers below:

Science, Energy Department, Research Development and Technology Losers: "Global Risk Insights" recently wrote, "Losers under President Trump’s plan clearly outweigh the winners, with the U.S. economy as the biggest loser. One key area hit hard is basic research funding for civilian science programs. This means the National Institutes of Health, the National Science Foundation and the Energy Department’s Office of Science would lose significant amounts from their combined $43 billion budgets. Funds normally going toward research and development for science and technology programs that businesses and industries could use would no longer occur." Think of what this will do to cities and states that have federal research laboratories, experimental technology centers, such as Albuquerque, Fort Worth, Dallas, Atlanta, Chicago, Seattle, Los Angeles, Nevada, Texas, Michigan, Ohio, Florida, the Carolinas, New Mexico, New York, on and on.

Agricultural Losers:

Another big loser is America's biggest "natural productivity" industry -- agriculture -- which is cut by $4.7 billion. President Trump's budget cuts the agriculture department, which handles farm loans, agricultural grants, disaster loans, credit for farm production, aid for farm equipment, and a safety net called "disaster programs" that was put in place decades ago to keep the industry intact in the event of disastrous droughts, natural disasters, or huge market disruptions. President Trump's budget guts the agricultural programs that farmers depend on. Exports of agricultural products from America to the rest of the world have kept America's heartland in business for decades. But under this budget, American farmers and farm communities will see massive failures and contraction.

Commerce and New Industry/Business Losers: President Trump's budget vastly cuts the Department of Commerce, by $1.5 billion. This department engages in programs to develop new industry, new business, and economic development for the USA. It helps create international markets for American-made goods. Trump ran on promises to "rebuild the economy," but it seems that his budget does the opposite.

State and City Development: Cut $10.9 billion. Many states and cities are finding that they are operating on a thin line, some are already in trouble. Chicago, Los Angeles, the State of California, Detroit, Cleveland, Flint and others have been near financial disaster because their expenses and debt often exceed income from taxes and fees. Most cities need about 20-27 percent from federal government programs to keep local budgets sound. This federal money supports infrastructure, airports, city services, even law enforcement. Trump's budget cuts $10.9 billion for states and cities. That means that your state or city will have to raise your taxes. President Trump's budget simply pushes the debt over to the local people in an effort to make his federal budget look better. And where do these savings go? To a defense budget for military spending that exceeds $574 billion, with the USA spending over nine times more than any nation on Earth for war weapons. Most of this money will be spent to fight wars in the Middle East. Some political historians hint that no one should be surprised if President Trump creates a war with North Korea, Russia, Iran, or some other nation just before the next election. It is a proven political method to increase chances of re-election.

Health and Human Services: Cut by more $12 billion, this is a department with a role in keeping Americans healthy and to reduce social mortality. A last resort safety net to "feed the hungry, get the poor off of the streets." Helping the medical industry as well as social services. Keeping standards high. So much for quality of health and lifestyle for the sick in the USA under President Trump's budget. If you have hungry and homeless in your town, the federal burden is being passed on to you. Expect more pressure to raise local taxes, otherwise, your town or city may be overwhelmed with new people issues.

Education: Cut by $9.2 billion. Someone has said that if America's school kids cannot compete with Chinese, Russian, Japanese or Middle Eastern kids, we have lost the future. Yet we are seeing teachers, schools, universities, facilities, training, even scholarships stripped to the bone. Two hundred years ago our forefathers developed a system to make public education in the USA a prime directive. This huge budget cut has grave implications for the future of American leadership in almost every area of the economy. If you wish to keep your teachers, schools and universities, expect more pressure to raise local taxes.

Justice: President Trump cuts the Justice Department by over $4 billion. We have already seen his intentions to "stack" the legal system, justice department, and court system with people who agree with his doctrines. Others will simply be starved out "due to cuts." A good court and legal system is a protection to maintain social stability. Expect crowded and overwhelmed court dockets, and watch the credibility of the legal and justice system decline.

Transportation: Cut $2.4 billion. Bridges, highways, rail and air systems are all in need of new infrastructure. Bridges, interstate highways, even aviation safety systems are old, crumbling and in need of expansion. President Trump promised to spend $50 billion for new infrastructure. But he has been very quiet on this of late, because he cannot keep his promise. Eisenhower helped develop the Interstate Highway System in America after seeing the positive impact Germany's Autobahn system had on it's economy. It seems that President Trump intends to take money away from these programs to create funds that he can transfer away from the heartland, so that he can have the funds for new spending.

WHERE IS THE MONEY GOING IF NOT TO THE HEARTLAND? $60 billion to pursue military development, homeland security and funds for military veterans. We can only assume that he is planning or expecting more wars in the Middle East or elsewhere.

This of course does not include $5 billion to $20 billion that is not mentioned in the budget to build a new wall on the Mexican border. We see no detail itemizing where this money comes from.

Also there is a fact largely unknown to the general public: Since the failure of the "Trumpcare" bill, to replace AHA, a huge source of funding has been lost. The new law, had an 'unadvertised' plan to take almost $1 trillion out of health care for people in the USA and put it back into the federal budget for other things. The Republican failure to pass the Trumpcare act actually puts this administration in a harder budget bind, because they now don't have the ability to conduit these healthcare funds to other purposes.

Here are more details, facts not politics:

PRESIDENT DONALD TRUMP'S PROPOSED BUDGET FOR THE UNITED STATES:

Discretionary spending, in billions

Agency	2017 baseline	2018 proposal	Change	Pct. change
Environmental Protection Agency	$8.2	$5.7	–$2.6	–31%
State and other development programs	38.0	27.1	–10.9	–29%
Agriculture	22.6	17.9	–4.7	–21%
Labor	12.2	9.6	–2.5	–21%
Justice	20.3	16.2	–4.0	–20%
Health and Human Services	77.7	65.1	–12.6	–16%
Commerce	9.2	7.8	–1.5	–16%
Education	68.2	59.0	–9.2	–14%
Transportation	18.6	16.2	–2.4	–13%
Housing and Urban Development	36.0	31.7	–4.3	–12%
Interior	13.2	11.6	–1.5	–12%
Energy	29.7	28.0	–1.7	–6%
Treasury	11.7	11.2	–0.5	–4%
NASA	19.2	19.1	–0.2	–1%
Veterans Affairs	74.5	78.9	+4.4	+6%
Homeland Security	41.3	44.1	+2.8	+7%
Defense	521.7	574.0	+52.3	+10%

Note: Totals are shown for fiscal years, which begin in October. They reflect base budget levels for each department, which do not include supplemental money for disaster relief, emergencies or additional war spending. They do include offsetting receipts and proposed changes in mandatory programs (CHIMPS) that are used to offset discretionary spending.

The proposal would also eliminate funding for nearly 20 smaller independent agencies, including the National Endowment for the Arts, the National Endowment for the Humanities, the Corporation for Public Broadcasting and the Legal Services Corporation, which finances legal aid groups.

NOW WHAT DOES THIS MEAN TO YOU AND I?

#1. Our taxes will go higher, both federal, state and local under President Trump's budget if approved.

#2. Expect a "value added tax" and a real possibility of a "Federal Gross Receipts Tax" whereby you have to pay tax on your gross income (not net after deductions). Get ready. It is coming. There has been discussion about removing the home mortgage interest rate deduction, but there has been strong public resistance to losing this tax deduction.

#3. Expect a proposal for a high national sales tax, in addition to local state sales taxes for every item you purchase (possibly including real estate and housing). The Trump team is discussing removing the deductions for these taxes. So you pay the taxes at a state level, a federal level, but may not be able to deduct payment for taxes from your income. We will watch and see how this develops.

#4. With higher taxes and more federal dollars transferred away from the heartland, USA, money will become tighter. You may expect an economic decline. Communities with federally funded projects may be hurt the most.

#5. As money becomes tighter, you can expect that interest rates will increase. We may see banks and low-profit-margin businesses experience higher failure rates.

#6. As interest rates increase, remember that always, when interest rates rise, stocks and real estate values decline. When interest rates decline, stocks and real estate tend to appreciate. This is an economic truth.

THE COMBINED ECONOMIC FORCES observed by BOOTHE GLOBAL PERSPECTIVES caused by this budget, if fully approved, have a high probability of pushing real estate values down over the next four years.

APPRAISAL AND VALUATION EXPERTS already predict this. We believe strategically that if you have substantial real estate assets, the time to get a new appraisal on your property (before values decline) is as soon as possible.

We suggest that you do serious planning and feasibility studies of new and ongoing projects and prepare your family, town, business and state for economic changes brought about by this budget. The economic and financial implications are huge. We are not alarmists, but we do know how to read a budget, and it is time that you study these factors closely. Get political preference and ideology out of economic and business considerations. We predict significant changes if this budget moves forward.