Donald Trump’s administration released a preliminary budget proposal for FY 2018. This budget year begins on October 1, 2017.
There is predictably wailing and crying from the left about massive budget cuts. When politicians complain about budget cuts, these are usually just cuts in the rate of projected growth. In the case of Trump’s budget proposal, there are actual cuts in many departments and government programs.
But before the libertarians and fiscal conservatives out there get too excited, the overall picture doesn’t look so good. While many of the departments would experience budget cuts if Trump has his way, there are a few areas that aren’t being cut, or are being increased.
The Department of Veterans Affairs (+6%), the Department of Homeland Security (+7%), and the Defense Department (+9%) would all see increases under Trump’s budget. Meanwhile, we don’t hear much spoken about the supposed non-discretionary spending of Medicare, Medicaid, and Social Security, which were not part of Trump’s recent proposal. Of course, these are discretionary, but they are non-discretionary to politicians and most of the electorate.
The problem here is that Medicare, Medicaid, Social Security, military spending, and interest on the national debt account for over 80% of the total federal budget. If this is going up, then the overall picture doesn’t look good for spending critics, even if much of the rest of the 20% is seeing some actual cuts.
The bottom line is that the total federal budget will still come in around $4 trillion if Trump’s proposal were enacted. This would simply shift some spending from mostly domestic programs to military spending. And while the domestic programs are certainly wasteful and a misallocation of resources, the military spending is usually worse.
If you reduce or eliminate grants for teacher training, loan guarantees for alternative energy, funding for the arts, and climate change prevention programs (among many things), then all libertarians should be able to cheer this. Whether or not you think these are noble causes is irrelevant to the libertarian who does not see it as a function of government if the state is to have any function at all.
These programs are harmful to our living standards as they misdirect resources away from higher priorities for consumers.
However, some military spending is far worse in that it is completely wasteful or actually destructive. If more money is spent to fight more wars, then this is destructive both in terms of lives and wealth (as well as civil liberties in many cases). Even if money is spent on tanks and helicopters for more drills and bases in faraway lands, it is still a waste of resources.
At least with some domestic spending, there is some benefit at times. Sure, the government destroys the education system and the medical care system, but at least some expenditures are useful, even if they are a misallocation of resources. The government could spend money to buy everyone in the country a new television. Some people don’t want or need a new television. If anyone wants a new television, they could go out and buy it themselves instead of having the government do it for them. But if such a government program existed, at least there would be some use for the resources, even if they are misdirected. In the case of much of the military spending, it is completely wasteful or outright destructive.
Virtually all government spending is a misallocation of resources. It is impossible for the government or anyone else to match up consumer preferences except for the consumers themselves.
The federal government, under Trump’s proposal, would continue to spend $4 trillion annually. The government is sucking up resources that could be put to better use. Of course, the government also destroys wealth and prevents future wealth creation through its tens of thousands of pages of rules and regulations.
The scary thing about Trump’s proposal is that it is just a starting point. The way bipartisanship works in Washington DC is that both sides compromise by giving each side the bigger government they want. The different sides will come to an agreement to allow the increased spending for the military while reducing the cuts proposed for domestic programs.
If Trump actually wants to significantly help the U.S. economy and the struggling American middle class, then he needs to get substantial cuts to both regulations and overall spending. We need a sharp overall decrease in the federal budget which would put resources back in the hands of consumers and investors.
Savings and capital investment are what ultimately lead to higher living standards. For this, we need a massive reduction in government.