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To test Trump’s budget, try our “aircraft-carrier index”

Rick Newman

Cut wasteful spending. Beef up defense. It sounds like a pretty simple formula.

But as President Donald Trump develops his first federal budget, he may be relying on a fallacy that has tripped up many budget reformers before him. In his speech before Congress on Tuesday night, Trump is likely to outline his plan to boost defense spending by 10%, or roughly $54 billion. To make sure that doesn’t expand the national debt, he’ll seek to cut $54 billion in spending from other things. His aides have already said that most federal agencies will get chopped, which Trump will probably highlight as his effort to right-size a bloated bureaucracy.

Here’s the catch: It is devilishly hard to cut federal spending by $54 billion, and many of the agencies some people consider wasteful or unnecessary account for a minuscule portion of taxpayer money. Besides, Congress has to approve all funding cuts, and chairs of various committees in the House and Senate are notoriously reluctant to yield an ounce of turf under their jurisdiction.

To illustrate the budgeting mismatch Trump faces, Yahoo Finance developed an informal tool we’re calling the “aircraft-carrier index.” Trump says he wants to build the Navy back to its proportions of the Reagan era, which would mean enlarging the fleet from 272 ships to 350 or so. A carrier is the most visible symbol of the Navy’s presence, so we estimated how much of a carrier the United States could finance if it completely killed the following agencies and devoted the entire savings to the shipbuilding budget. Here are some examples, using agencies Trump has said he wants to scale back or kill outright:

Foreign aid. One big cut Trump has floated is a 37% decline in the State Dept.’s budget, mostly from draconian cutbacks in foreign aid. The State Dept. gets about $50 billion in annual funding, including the US Agency for International Development, so 37% of that would be $18.5 billion. A Nimitz-class carrier costs about $13 billion. So with that money, you could buy one carrier with enough money to cover 40% of the cost of a second. But slashing the diplomatic budget is bound to be highly controversial, and he may not be able to get Congress to sign off.

Environmental Protection Agency. Its annual budget is about $8.2 billion per year, which would cover roughly two-thirds of the cost of a carrier.

Consumer Financial Protection Bureau. Annual budget: $606 million dollars. That could buy 4.6% of a carrier.

Planned Parenthood. About $550 million in federal, state and local funding combined. That’s 4.2% of a carrier.

Corporation for Public Broadcasting. About $450 million in federal funding, or 3.5% of a carrier.

National Endowment for the Arts. $150 million, or 1.2% of a carrier.

You get the idea. The one huge problem with the federal budget is that three big “entitlement” programs—Social Security, Medicare and Medicaid—account for nearly half of all spending. Those payments mostly go out with no need for Congressional approval. Interest payments, which must be paid, are another 6% of the budget, and defense is 16%.

Trump has said he won’t cut Social Security or Medicare, but cutting Medicaid, which provides health care for the poor, is possible. Put it all together, and Trump has to find 100% of the cuts he’s looking for in less than 40% of the budget. Given the legislators, lobbyists, corporations and other interest groups certain to fight desperately for every bit of spending that benefits them, Trump’s job is unenviable, to say the least.

If a president were to go big and restructure entire Cabinet agencies—the kind of reorganization big companies must do from time to time—that might move the needle. Three agencies sometimes targeted for elimination—the Depts. of Commerce, Education and Energy—account for about $90 billion in federal funding each year—the equivalent of seven aircraft carriers. If those agencies could be folded into other parts of the government—with overhead eliminated but core functions retained—it might generate meaningful savings. Trump hasn’t gone that far yet. But maybe he will, once he discovers how little he’ll get by squeezing lesser pockets of the bureaucracy.

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Confidential tip line: rickjnewman@yahoo.com

Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman