Surprise Winner in the $1.3 Trillion Spending Bill

Plus: Economic outlook improves By Michael Rainey A Surprise Winner in the $1.3 Trillion Spending Bill President Trump had plenty of complaints about the massive spending package Congress sent him last week, at one point even [threatening to veto]( the bill before finally signing it into law on Friday afternoon. [Politico’s Michael Grunwald]( wrote that Trump’s irritation was in some ways understandable, given that the omnibus bill funded so many programs that were important to President Obama, while largely ignoring the deep budget cuts called for by the current administration. None of the agencies or programs that were targeted by Trump’s budget proposal from a year ago were eliminated, Grunwald said, while the spending package “not only protects Obama’s priorities, it expands them.” Here’s are some illustrative examples from the spending bill signed last week: - Nonmilitary spending is up $63 billion from last year; President Trump had proposed $54 billion less. - Funding for the Transportation Investment Generating Economic Recovery (TIGER) program, an Obama infrastructure initiative, was tripled; the Trump budget called for its elimination. - The Community Development Block Grant received a 10 percent boost, to $3.3 billion; Trump had called for the program’s elimination. - The renewables budget at the Department of Energy got a 14 percent increase; Trump had wanted to cut it by 65 percent. - Research and innovation funding rose 12.8 percent, to the highest inflation-adjusted level ever; Trump had called for the largest cuts in history. Not every budget item went the Democrat’s way. The omnibus does cut funding for some agencies and programs, although Congress reduced the severity of many of those cuts. For example, Trump wanted to cut funding for the State Department by 25 percent, while lawmakers limited that reduction to 6 percent. And there are plenty of issues that are still sore points for Democrats, including the inability to make headway on the Deferred Action for Childhood Arrivals program to protect immigrants brought to the U.S. illegally as minors. Even so, the resilience of the Obama administration’s funding priorities was remarkable, and Trump wasn’t the only one who noticed the odd mix of spending coming out of a Republican-controlled Congress. Sen. Rand Paul of Kentucky told Fox News Thursday, “This could have been written by President Obama and liberal Democrats.” On the other side of the aisle, Sen. Chuck Schumer largely agreed, saying, “This spending agreement brings the era of austerity to an unceremonious end and represents one of the most significant investments in the middle class in recent history.” The Atlantic’s Russell Berman described the situation [this way]( “President Obama finally got a Republican-controlled Congress to fund his domestic budget. All it took was Donald Trump in the White House to get it done.” Chart of the Day The [Tax Policy Center]( provides this look at one part of government revenue, social insurance and retirement receipts. It notes that such receipts totaled $1.16 trillion in 2017, or 6.8 percent of GDP. "From the mid-1980s to mid-1990s, the ratio was above 7.5% of GDP, largely due to the 1983 Social Security reforms,” TPC says. Business Economists More Optimistic on Growth After Tax Cuts, Spending Increases While the omnibus spending bill is still making political waves in Washington, business economists like what they are seeing in current fiscal policy. The latest [survey]( from the National Association for Business Economics found a substantial boost in growth projections, thanks in large part to the tax cuts and increased spending passed by Congress. Here's the summary from NABE Vice President Kevin Swift: “NABE Outlook panelists are more optimistic about the U.S. economy in 2018 than they were three months ago, especially regarding prospects for the industrial sector of the economy. The panel’s median forecast for average annual real gross domestic product (GDP) growth in 2018 is 2.9%, up from 2.5% in the December survey. In addition, 76% of panelists believe that risks are weighted to the upside.” The survey's chair, David Altig of the Federal Reserve Bank of Atlanta, added, “In large part, the increase in growth prospects appears related to federal fiscal policies. The median estimate of the impact on real GDP growth resulting from fiscal policy changes is an increase of 0.45 percentage points in 2018, and 0.3 percentage points in 2019." The NABE panelists see a reduced probability of recession, and said the outlook for inflation remains "modest." Goldman Sees Profit in the Tax Cuts David Kostin, chief U.S. equity strategist at Goldman Sachs, said in a note to clients Friday cited by [CNBC]( that companies in the S&P 500 can expect to see a boost in return on equity (ROE) thanks to the tax cuts. Return on equity should hit the highest level since 2007, Kostin said, providing a strong tailwind for stock prices even as uncertainty grows about possible conflicts over trade. Return on equity, defined as the amount of net income returned as a percentage of shareholders’ equity, rose to 16.3 percent in 2016, and Kostin is forecasting an increase to 17.6 percent in 2018. "The reduction in the corporate tax rate alone will boost ROE by roughly 70 [basis points], outweighing margin pressures from rising labor, commodity, and borrow costs," Kostin wrote. News - [Why Some Americans Are Risking It and Skipping Health Insurance]( – Bloomberg - [Alexander and Murray’s Bipartisan Obamacare Alliance Disintegrates]( – New York - [Mnuchin Says Trump Needs Line-Item-Veto Power, Even Though It’s Unconstitutional]( – MarketWatch - [Community Health Rankings Find Major Disparities Based on Location, Economy]( – The Week - [A Billionaire Couple Is Pumping Money into the Drug Pricing Debate. Can They Loosen Pharma’s Grip?]( – STAT - [GOP Group Launches New Ads to Promote Tax Law in House Districts]( – The Hill - [As Amazon Steps Up Tax Collections, Some Cities Are Left Out]( – New York Times - [How a Trump Power Play Upended the $30 Billion Gateway Project]( – Washington Post - [Megadisasters Devastated America in 2017. And They’re Only Going to Get Worse]( – Vox - [How the New Tax Law Creates a ‘Perfect Storm’ for Roth IRA Conversions]( – MarketWatch - [Here's the Reason You Need to Check Your Pay Stub]( – CNBC Views - [Steven Mnuchin’s Deeply Worrying Gaffe]( – James Downie, Washington Post - [Congress Faces Challenging Times for American Fiscal Responsibility]( – G. William Hoagland, Bipartisan Policy Center - [Privatization Is Really a Plan to Dismantle Social Security]( – Max Richtman, President and CEO of the National Committee to Preserve Social Security and Medicare - [US Health Care Is Tied Up in Red Tape]( – Bloomberg View Editorial Board - [The Truth About Medical Bankruptcies]( – Megan McArdle, Washington Post - [If Congress Doesn’t Fix Health Care, Emergency Departments Will Soon Be a Mess]( – Dr. Arthur Garson Jr., The Hill - [Congress’ Bush-League Omnibus Provision an Embarrassment]( – Walter Shapiro, Roll Call - [Arms Sales Decisions Shouldn’t Be About Jobs]( – William D. Hartung, Defense One - [Does It Matter That the Fed Has Been Wrong For Years?]( – Adam Ozimek, Forbes - [The Growing College Graduation Gap]( – David Leonhardt, New York Times - [The Fed Just Sent Congress a Message]( – Washington Post Editorial Board Copyright © 2018 The Fiscal Times, All rights reserved. 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