Today, the President will release a part of his FY 2020 budget. The budget is scheduled for the first week of February but due to the government shutdown it was delayed. Today’s unveiling will be only part of the Administration’s proposal. It is expected that the Administration will propose a five percent cut in domestic spending while proposing a big increase in defense spending. It is not clear if this first installment will cover all departments since most did not have a final budget until last month.

Earlier reports indicate the Administration plans to request a 2020 budget of $750 billion in total defense funding, compared to the current $716 billion in fiscal 2019. They will not seek to raise the budget caps that are still in place. Instead they will try to use a budget loophole called the Overseas Contingency Operations (OCO) fund. Defense spending of $750 billion would include $174 billion coming from OCO funding. At the same time the old budget caps will snap back into place causing all non-defense discretionary (annually appropriated) funding to absorb an 11 percent cut. The nondefense spending includes some veterans spending, the State Department, foreign aid, and military construction. Defense would also have to take a nine percent cut but the Administration would make up for that by using the OCO.

The OCO spending does in fact increase spending and the annual deficit but it does not count against the current budget spending caps. On that front a report last week by the Treasury Department indicated that the deficit grew by 77 percent in the first four months of this fiscal year. That was driven by a loss in tax revenue due to last year’s tax cut while spending increased by 9 percent driven by the Defense Department (12 percent increase) and by Medicare (increased by 16 percent). How this will impact the debt ceiling is unclear. The debt ceiling had been “suspended” until March 2, 2019. It is now expected that ceiling can be avoided by the US Treasury Department using various budgeting maneuvers, but it will be hit in late summer early fall around September or October.

The budget is also likely to include some policy proposals. They are likely to include several work requirements as a condition for access to health care, housing and nutrition. In another area, last month a Washington Post article said that “the Department of Health and Human Services is seeking broad authority to include faith-based foster-care and adoption groups, which reject LGBTQ parents, non-Christians and others, in the nation’s $7 billion federally funded child-welfare programs” If the budget does include such language it may suggest that the Administration does not believe they have the authority to issue waivers of non-discrimination regulations as they did in the state of South Carolina.

The Labor-Education-HHS budget proposal is likely to include various cuts that were in the Administration’s 2018 and 2019 budget including the elimination of the Social Services Block Grant (SSBG), the Community Development Block Grant (CDBG) and the 21st Century Afterschool block grant as well as cuts or freezes to the National Institutes of Health.

Just as likely the Congress will reject those proposals. In fact, some of those programs received increases despite being controlled by the President’s party. The House and Senate will likely start their appropriations hearings soon. The House Appropriations Committee is setting deadlines for members of the House to make their appropriations requests with those deadlines set for the end of this month on or before March 28. The Senate clock is later and likely to be in mid-April. In either case it is unclear at what point a deal on raising budget caps will be attempted. The President would have to sign such an agreement.