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Trump demands action to reduce deficit, pushes new deficit spending

President Trump told Cabinet members they must cut budgets by 5 percent, saying, "One penny, every year, after four or five years, country's in good shape." (Video: The Washington Post)

President Trump is demanding top advisers craft a plan to reduce the country’s ballooning budget deficits, but the president has flummoxed his own aides by repeatedly seeking new spending while ruling out measures needed to address the country’s unbalanced budget.

Trump’s deficit-reduction directive came last month, after the White House reported a large increase in the deficit for the previous 12 months. The announcement unnerved Republicans and investors, helping fuel a big sell-off in the stock market. Two days after the deficit report, Trump floated a surprise demand to his Cabinet secretaries, asking them to identify steep cuts in their agencies.

This account of Trump’s deficit stance is based on conversations with 10 current and former officials in the White House and Congress. They spoke on the condition of anonymity to describe internal deliberations or private conversations. The White House has not responded to repeated requests for comment.

Scenes from Trump’s second year in office

Jan. 8, 2019 | President Trump speaks on television from the Oval Office during a national address on border security on the 18th day of the partial government shutdown. (Jabin Botsford/The Washington Post)

Administration officials have, for now, crafted a sparse plan that would recycle past proposals and call on Congress to trim federal spending on a variety of programs, two White House officials said.

But even as he has demanded deficit reduction, Trump has handcuffed his advisers with limits on what measures could be taken. And almost immediately after demanding the cuts from his Cabinet secretaries, Trump suggested that some areas — particularly the military — would be largely spared. 

The president has said no changes can be made to Medicare and Social Security, two of the government’s most expensive entitlements, as he has promised that the popular programs will remain untouched.

When staffers sought to include an attack on Democrats’ Medicare-for-all proposals in Trump’s campaign speeches this fall, he initially blanched, two administration aides said. Medicare is popular, he said, and voters want it. Eventually, he agreed to the attack if he could say Democrats were going to take the entitlement away.

House Speaker Paul D. Ryan (R-Wis.) made a name for himself as a deficit hawk, but backed a tax plan and a spending bill that are ballooning the national debt. (Video: Jenny Starrs/The Washington Post, Photo: Matt McClain/The Washington Post)

He has suggested that military spending could be curtailed slightly, from $716 billion this year to $700 billion in his next proposal, a smaller reduction than other agencies would face.

The plan is not expected to include large-scale tax increases, which would be a non-starter with congressional Republicans.

In total, government debt has risen roughly $2 trillion since Trump took office, and the federal government now owes $21.7 trillion, according to the Treasury Department. The president’s agenda has contributed to that increase and is projected to continue to do so, both through the GOP tax cut and with bipartisan spending increases.

And Trump’s recent interest in the issue is at odds with his long-standing previous indifference, according to current and former aides.

Three former senior administration officials said the deficit issue was rarely brought up in Trump’s presence because he had no interest in discussing it.

When former National Economic Council director Gary Cohn’s staffers prepared a presentation for Trump about deficits, Cohn told them no. It wouldn’t be necessary, he said, because the president did not care about deficits, according to current and former officials.

Trump also repeatedly told Cohn to print more money, according to three White House officials familiar with his comments.

“He’d just say, run the presses, run the presses,” one former senior administration official said, describing the president’s Oval Office orders. “Sometimes it seemed like he was joking, and sometimes it didn’t.” 

Two current aides said they had not heard Trump make that comment in recent months, and he is changing his tune on the budget in public statements. 

“We’re going to start paying down debt,” Trump said during a White House event last month. “We have a lot of debt.”

Trump often uses “debt” — the total amount the government owes — to refer to the deficit, the annual gap between what the government takes in and what it spends.

Trump also is often not versed in the particulars of the federal budget.

Chief of Staff John F. Kelly has told others about watching television with Trump and asking the president how much the chairman of the Joint Chiefs of Staff earns. Trump guessed $5 million, according to people who were told the story by Kelly, startling the chief of staff. Kelly responded that he made less than $200,000. The president suggested he get a large raise and noted the number of stars on his uniform.

Even as Trump has told aides he’s finally interested in taking steps to reduce deficits, he has floated several ideas that would further expand them. He has proposed a 10 percent tax cut for the middle class, a huge package of infrastructure spending and billions of dollars for a wall along the U.S.-Mexico border. He hasn’t specified how he would pay for any of those things.

Trump repeatedly pushed staffers to spend more on the infrastructure bill this summer, envisioning large projects for many key states. “Infrastructure Week” became a joke in the White House because it often happened during disastrous weeks that were waylaid by guilty pleas, errant tweets or bombshell developments in the Russia probe. Many staffers thought the problem was that it was too expensive. But Trump thought the government was not spending enough, according to current and former officials, and he is looking to revive the pricey plan.

Because the government spends much more than it brings in through taxes, it must borrow money to cover the balance by issuing debt. The U.S. Treasury projects it will issue $1.3 trillion in new debt this year, more than double its borrowing from one year ago. 

Rising interest rates are projected to make the cost of borrowing money much more expensive. The United States will soon spend more money on interest payments than it does for the entire Medicaid program, more than $400 billion.

Trump’s internal contradictions on the budget mirror how conflicted the Republican Party has become on an issue that had been one of its tenets for decades. Speaker Paul D. Ryan (R-Wis.), who campaigned on reducing deficits, has rarely brought up the issue with the president in recent months. 

“Republicans have talked a good game about deficit spending, but in reality, their record shows they haven’t stood up and stopped it,” said Marc Short, the president’s former director of legislative affairs. 

As they prepared a tax bill in 2017, Republicans initially suggested their plan would offset the cuts with tax increases elsewhere, but they abandoned that commitment early in the process. Trump in December signed a law that nonpartisan analyses suggest will add $1.5 trillion to deficits over the next decade. That figure is projected to jump to more than $2 trillion if the law’s temporary cuts to income tax rates are made permanent.

Many Republicans have said the tax cuts will pay for themselves by producing a massive jump in economic growth — a claim rejected at the time by many economists across the political spectrum. Growth has increased moderately since the cuts took effect, but the increases have fallen well short of the level needed to prevent the cuts from adding to deficits.

Trump also signed a bipartisan $1.3 trillion budget bill in March that added new funding for the government’s domestic and military programs. The president criticized the bill at the time and said he would not sign another mass budget measure.

With Democrats set to take control of the House in January, a future deficit-reduction deal would have to be bipartisan, and Hill veterans see that as a stretch.

As of now, the central plank of the White House’s new deficit-reduction push would be a proposal to cut congressionally approved spending by about 5 percent. Some programs would see a much smaller proposed reduction; Trump has said publicly the reduction for the Pentagon could be about 2 percent.

But any of these changes would have to be approved by House Democrats, who are likely to be resistant, especially as many campaigned on large-scale increases to the government.

“Could there be a bipartisan deal on deficits?” asked Avik Roy, a former policy adviser to incoming senator Mitt Romney (R-Utah), former Texas governor Rick Perry and Sen. Marco Rubio (R-Fla.). “You never know, but I don’t think that’s what the Democrats will be itching for in the House.”

The White House is set to detail its new plans in a budget proposal early next year. Some White House officials have considered proposing a major overhaul of Medicaid, but two people briefed on the process said Trump is likely to offer the same changes that the White House has called for unsuccessfully in the past.

It is unusual for budget deficits to expand the way they have during the Trump administration because they typically contract during periods of economic growth. During President Barack Obama’s last year in office, the deficit was $587 billion, a decrease from years when it had reached $1 trillion annually in the aftermath of the financial crisis.

Government spending is largely broken into two categories. There are programs that are automatically funded, such as Medicare and Social Security, and programs that must be funded by Congress each year, such as the military, housing, intelligence and transportation. 

That category is known as discretionary spending, and that’s where Trump has told his Cabinet advisers to seek a 5 percent reduction. But cuts of that magnitude would probably reduce the deficit by about $70 billion, and it’s projected to reach $1 trillion next year, showing the magnitude of the tax cuts and other parts of the budget that have remained untouched.

Over a round of golf at Trump National Golf Club in Virginia last year, Sen. Bob Corker encouraged the president to push for deficit-control measures and to force Republicans to cut spending. 

Trump was dismissive of the Tennessee Republican’s request. “The people want their money,” the president said, according to two people familiar with the exchange. The conversation soon moved on.