Goldman Warns, Trump Budget "More Notable For What's Not Included"

As expected, the White House has released topline spending totals for government agencies in FY2018, endorsing a $30bn nominal cut in congressional appropriations. However, as Goldman Sachs details, the release includes no projections of the overall fiscal path or economic assumptions, and includes no discussion of tax reform or infrastructure proposals. Those details are expected to be released in May.


1. The President’s “skinny” Budget proposes a $30bn (0.15% of GDP) nominal reduction in total funding appropriated to government agencies in 2018, essentially endorsing the decline in spending called for under current law as a result of the spending caps under sequestration. Within this declining topline figure, the White House proposes to shift $54bn (0.3% of GDP) from non-defense to defense spending in 2018.

2. For FY2017, the budget proposes $3bn in new funding for the border wall and immigration enforcement, and $5bn in new supplemental defense spending. These proposals may be considered as part of the spending bill Congress will attempt to pass by April 28, when current government spending authority expires.

3. The proposal should be seen as a starting point for congressional negotiations. Note that congressional appropriations bills are not passed through the "reconciliation" process and thus will likely to need 60 votes--and thus at least 8 Democratic votes—to pass in the Senate. Assuming Democrats object, it seems unlikely that the full extent of the proposed cuts to domestic agencies will be approved, which would lead to a smaller increase in defense spending and/or a smaller cut (or increase) in total congressional appropriations than what the President proposes.

4. From a market perspective, this proposal is more notable for what is not included...

  • It provides no economic or fiscal projections, and
  • no discussion of tax reform or infrastructure plans, which the White House says will be released “in coming months”, likely as part of a full budget submission to Congress that we expect to be released around May.
  • It also includes no discussion of the Obamacare replacement plan.

But apart from that, everything is awesome?


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