President Donald Trump unveiled his first full budget proposal on Tuesday. With it, he promises to balance the federal budget within a decade.
That claim rides on $3.6 trillion in spending cuts to various programs over the next 10 years, the most ever proposed by any president, according to the proposal. Programs on the chopping block include Medicaid, food stamps (or SNAP), Social Security Disability benefits, health care, and student loan benefits.
The budget also assumes best-case scenario economic conditions. For example, it forecasts a steady 3-percent economic growth over the next decade, which would add another $2.1 trillion in savings.
However, on May 18, the Committee for a Responsible Federal Budget said that to achieve such sustained growth “would require a heroic combination of good policy and good luck.”
Other assumptions from the proposal include a consistent 2.3 percent inflation rate and the unemployment rate capping at 4.8 percent.
The Trump budget isn’t all about cuts, however. It also calls for more spending on defense, border control, and other infrastructure investments. There’s also a proposal to create the first federally funded parental leave program.
A breakdown of the Trump budget cuts
During his campaign, President Trump pledged to leave Social Security, Medicare, and Medicaid alone. But in his budget proposal, Social Security and Medicaid, along with other safety-net programs, suffer cuts.
The budget proposal plans to reform Medicaid to allow states to manage their own programs. States would also have the ability to choose between a per-capita cap and a block grant from the federal government. The reform is projected to save $610 billion over 10 years.
The Children’s Health Insurance Program (CHIP) would also be cut by $5.8 billion over the next decade. CHIP provides health insurance coverage to children whose parents earn too much to qualify for Medicaid, but not enough to afford private health insurance.
Supplemental Nutrition Assistance Program (SNAP)
Also know as food stamps, SNAP provides assistance to low-income households. Under the Trump budget proposal, the federal government would close eligibility loopholes. It would also instate a requirement for able-bodied adults in the program to work.
The cuts could also affect the Meals on Wheels program, which provides affordable meals to the elderly. The program currently accepts SNAP for payment. The proposal estimates the savings from these changes to be around $191 billion over 10 years.
Social Security Disability Insurance (SSDI)
Citing a low labor force participation of 20 percent among people with disabilities, the Trump budget proposal seeks to increase that participation rate.
While vague on the details, the plan will seek to dispel the expectation that receiving disability benefits means a permanent exit from the workforce. Through early intervention, return-to-work initiatives, the proposal hopes to decrease the need for disability insurance.
Through this reform of the SSDI program, Trump hopes to save $72.4 billion over 10 years.
Earned Income Tax Credit (EITC) and Child Tax Credit (CTC)
Under the budget proposal, only those who are authorized to work in the United States would be allowed to receive the EITC and CTC. Under the current law, a Social Security Number valid for work is not required.
Trump estimates this would save the federal government $40.4 billion over the next decade.
Temporary Assistance for Needy Families (TANF)
The budget proposes to reduce the block grant the federal government provides to states for the TANF program by 10 percent. It would also eliminate the TANF Contingency Fund that states could draw upon during times of economic distress.
These cuts would result in $21.6 billion in savings over 10 years.
The Trump budget plan proposes a complete overhaul of the federal student loan program. Initiatives include eliminating subsidized student loans, getting rid of the Public Student Loan Forgiveness Program, and creating a single income-driven repayment plan.
These initiatives would save $143 billion over the next decade, according to the proposal.
Other notable Trump budget cuts include limiting farm subsidies ($38 billion), establishing new solvency standards for unemployment insurance ($12.9 billion), and spending cuts to several government agencies.
A breakdown of spending in the Trump budget
While President Trump’s main goal is to cut back on what he considers unnecessary spending, he also makes a case in his budget proposal for new spending.
Public and private infrastructure investment
Most of the new spending proposed over the next decade is to support $1 trillion in private and public infrastructure investment. The budget plans to allocate $200 billion over the next decade in this endeavor.
Parental leave program
Following up on a campaign promise, President Trump proposes a parental leave program to help new parents adjust after the birth of a child. With the budget, the federal government would provide six weeks of paid leave for new parents, including adoptive parents.
This new program would cost $19 billion over the next 10 years, according to the proposal, but could help parents struggling with student debt.
Another notable investment includes $2.6 billion to put toward “funding to plan, design, and construct a physical wall along the southern border” of the United States.
Trump budget also calls for tax reform
The budget proposal also calls for various tax cuts and reforms, including:
- A lower individual income tax rate
- A higher standard deduction
- Repealing the 3.8 percent surcharge on capital gains and dividends established through the Affordable Care Act
- Ending the alternative minimum tax
- Abolishing the estate tax
- Reducing corporate tax rates
- Eliminating special interest tax breaks
Congress unlikely to approve budget as-is
President Trump’s budget proposal calls for a massive rethinking of how the government spends its money. However, some Republican lawmakers may not be on board with the proposal.
In the week leading up to the budget announcement, Senate Majority Leader Mitch McConnell said in an interview with Bloomberg that the president’s priorities “aren’t necessarily ours.”
Other senators, including Senator John McCain and Senator John Cornyn, have declared the budget dead on arrival. According to Cornyn, though, this declaration isn’t necessarily a reflection of the contents of the budget.
“Almost every president’s budget proposal is basically dead on arrival, including President Obama’s,” Cornyn said in an interview with NBC News. He added that such proposals are more a wish list than legislation.
Still, Trump’s priorities do align with the Republican-led Congress. This could mean that spending cuts in Trump’s proposal could remain part of the conversation as Congress builds its own budget.
What’s next for Trump’s budget?
Now that President Trump has released his proposal, Congress will go to work on one of its own. It may or may not include some of the president’s priorities, but it’s very likely that Trump will use his influence to try to persuade Congress in his favor.
Once House and Senate committees hold hearings on Trump’s budget proposal, Budget committees will determine what to keep and what to leave out. Keep in mind that some of the budget proposals may change existing laws, so Congress will also need to consider those.
Once the Budget committees submit their proposal, the House and Senate will vote on it. If Senate Democrats filibuster, the budget will need at least 60 votes in the Senate to pass. If they choose the reconciliation process, however, it will only take 51 Senate votes to pass.
What Trump’s budget proposal means for you
Right now, it’s hard to say how much, if any, of Trump’s budget proposal will get through Congress. With many leading Republicans thinking that the cuts go too far, it may take time to sort out what’s probable and what isn’t.
In the meantime, avoid panic. Fortify your finances in case one or more of the major proposals get pushed through and affect you and your family.
Consider contributing to an emergency fund. Having extra cash on hand for a rainy day can make a big difference if you suddenly find yourself in a situation where you need one of the government safety nets that may get slashed.
Lastly, be proactive by calling your state’s representatives and sharing your feelings, positive or negative, about the proposed initiatives.
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.57% – 6.97%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
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|2.79% – 8.39%6||Undergrad & Graduate|