February 14, 2018

Trump Administration’s Budget Proposal: Would it Help Drain the Swamp?

Tad DeHaven

Research Analyst

The Office of Management & Budget has released President Trump’s proposed budget for fiscal year 2019. A hallmark of the Trump campaign was a call to “drain the swamp” in Washington. Any serious attempt to do so requires targeting for elimination those federal programs that confer privileges upon particular commercial interests.

So, let’s look at how some of the more infamous examples of federal privilege programs would fare if the administration’s budget proposal were adopted:

  • Agricultural Subsidies: On one hand, the budget proposes to cut funding for a few programs at the U.S. Department of Agriculture that primarily benefit commercial agricultural interests and rural businesses. It would also cap subsidies for wealthier farmers and reduce crop insurance premium subsidies. On the other hand, it would increase subsidies for these interests as part of the administration’s plans for infrastructure. While the budget says that the government “should not be singling out select commodities for special assistance,” under this proposal the federal government would continue to do just that.
  • The Economic Development Administration and the Manufacturing Extension Partnership programs at the Department of Commerce would be eliminated. These two programs have (deservedly) been considered “corporate welfare” for decades.
  • The Department of Energy’s Advanced Research Project Agency-Energy (ARPA-E) program would be eliminated and applied energy programs would be cut roughly in half. A couple of small loan programs, including the Advanced Technology Vehicles program, would also be eliminated. This contrasts with the administration’s pledge to spend taxpayer dollars on “early-stage research and development that will enable the private sector to deploy the next generation of technologies and energy services…” Research and development should be left to the private sector.
  • Housing and Urban Development’s Community Development Block Grants which sometimes directly benefit particular businesses, would be eliminated. The budget notes that “State and local governments are better positioned to address local community and economic development needs.” That’s true, though the same could be said for numerous other programs that the administration doesn’t target for elimination.
  • The Essential Air Service at the Department of Transportation would be cut by about a third. This program, which keeps non-economical airports in operation to the benefit of carriers, should be eliminated.
  • The Small Business Administration, which benefits banks and some businesses at the expense of others, comes away largely unscathed. The budget claims that “the SBA helps expand private lending to small business owners that cannot attain it elsewhere,” but the idea that these lending programs are filling some sort of market void is simply not true.
  • The U.S. Export-Import Bank also comes away unscathed. And like the SBA, the budget adopts the language of its beneficiaries in justifying the agency’s continuance. As other Mercatus Center scholars have repeatedly noted, the Ex-Im Bank exists primarily to provide subsidized export credit to major corporations like Boeing.
  • The Overseas Private Investment Corporation, which provides subsidized financing to domestic and foreign companies investing in developing countries, would be consolidated with other federal development programs into a new “Development Finance Institution.” According to one press report, dove-tailing legislation will soon be introduced in Congress to accomplish the reorganization, which would reportedly give the new agency “the ability to take an ownership stake — or equity — in its investments, an authority that OPIC currently lacks, but which its leaders and supporters have long argued in favor of granting.” Not good.

Some brief thoughts:

The budget proposal does almost nothing to “drain the swamp,” and in many ways will sustain or expand it. The inconsistencies are striking. Language that the administration uses to justify eliminating a few programs that dispense special-interest privilege could apply to the many programs that it has decided to keep around.

Presidents George W. Bush and Barack Obama also proposed to cut and eliminate various corporate welfare programs. Neither fought for them, and the outcome was predictable because the interests who benefit from these programs are better organized than the taxpayers and consumers who stand to gain from their elimination. The Trump administration itself proposed cuts and eliminations with its first budget, but it, too, failed to fight for these cuts. If the administration isn’t going to fight for the cuts, why bother?

Moreover, the president just signed a budget framework that basically gave Congress a blank check for the very programs that the administration claims it wants to cut or eliminate. Thus, this budget proposal is akin to a ship with no captain and a broken rudder.

Lastly, for those who view the Pentagon’s budget as a fountain of privilege for military suppliers and defense contractors, those special-interests are arguably the biggest winners under this proposal.