Raising the Curtain on the FY2020 Budget

Weekly Wastebasket Raising the Curtain on the FY2020 BudgetUntil the main event, we only know what the administration wants to tell us. But from what we can tell, it's a story full of drama and contradictions.

Budget & Tax,  | Analysis
Mar 8, 2019  | 6 min read | Print Article

For budget watchdogs, the rollout of the President’s Budget Request is a cross between Oscar season and the Olympics. We wait with bated breath to see what programs win and lose, and then we buckle down to a marathon session of combing through documents to find the hidden stories.

Next Monday, the president is releasing a preview of his fiscal year (FY) 2020 budget requests. What we see will only be the first volume, which will contain the president’s budget message, priorities, budget overview and top line numbers for each cabinet department and independent agency, and summary tables. Like a trailer for a movie, it tells us most of the story – but leaves out key details and potential plot twists. A week later we get the full-length feature: five volumes, backed by thousands of pages of detailed budget justification sheets from each agency.

Hints, But No Spoilers

As with promotion of any movie or TV show, the pre-release information is limited. So what do we know about the budget? Leading up to the budget and even immediately after its release, you only know what the administration wants to tell you.

From what we know, the FY2020 budget is a story full of drama and contradictions. On the one hand, the administration’s concern for the deficit means non-defense discretionary accounts (pretty much everything but the Pentagon and mandatory programs like Social Security and Medicare) are going to receive a five percent cut. On the other hand, the administration has also indicated that the Overseas Contingency Operations account – the off-budget slush fund supposedly for warfighting – will get as much as $174 billion! To put that into perspective, OCO got $69 billion in FY2019. The $100+ billion increase to OCO – just the increase – is greater than the discretionary budgets of every agency other than the Pentagon.

We’ll have to wait for the full length budget premier to find out important – sometimes unexpected – details. How will the five percent cut to non-defense discretionary be implemented across the various departments? Who will be the winners and losers? Will the Department of Veterans affairs grow and the Environmental Protection Agency shrink? Will the Department of Agriculture staff, paid with discretionary funds, have to contribute to deficit reduction while the mandatory entitlement programs they manage continue lining the pockets of wealthy agribusiness to the tune of billions annually? And will the new expenses in OCO be overseas or address contingencies?

Tune in on March 18th to find out these details and more.

Baselines And Starting Points

A few other important details will be revealed in next week’s preview. For starters, we don’t know what baseline is being used. The Budget Control Act of 2011 (BCA) governs the top line funding levels for FY2020 and 2021. The non-defense discretionary caps under the BCA are $55 billion less than the level of spending in FY2019. So if the baseline is the BCA-set level, a five percent cut in non-defense discretionary is significant. If it is the FY2019 amount, the remaining funds would be still be greater than those accounts received in FY2017 by $48 billion.

Our bet is that the budget uses the BCA-set spending levels as the baseline.

Why? Because when the OCO boost was announced, Acting OMB Director Russ Vought gave us a little bit of a spoiler: that the dramatic increase is because OCO dollars are off budget. (No pretending this growth relates to an increase in unexpected events overseas). In past agreements to adjust the BCA caps, the Democrats have demanded dollar-for-dollar matches in Defense and non-defense discretionary spending. If the base Defense spending is cued off the BCA spending level, adding $174 billion in OCO would bring the total Pentagon budget to a tidy $750 billion.

The Presidential Budget Requests do not become law – they are a starting point for a longer back and forth with Congress about what to spend and where to spend it. But it does articulate priorities. With the release of the budget trailer, a few things will become clear. Is this administration serious about the deficit and debt? Or does it use deficit reduction as fig leaf for cutting spending on projects that are favored by the opposition?

A big boost in defense spending coupled with a politically unrealistic large cut to non-defense that will be unpopular with Democrats and many Republicans would reveal that any handwringing about the deficit is just posturing and political pandering. Especially if it is not coupled with revenue proposals to help address the deficit. Taxpayers deserve a budget request that is about governing, setting priorities, and leading the country into fiscal strength.

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