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Within the last week, U.S. President Trump released his $4.7 trillion fiscal 2020 budget plan, kicking off the annual federal budget process. IPC is watching several budget debates that could impact the electronics industry and its supply chain.
It’s important to remember that Congress has the power of the purse, and the President’s budget is merely a request. Ultimately, members of Congress must make the tradeoffs that result in spending bills that can pass.
When passed in identical form by both houses of Congress, the budget establishes the overall allocations that the appropriations committees then use to write annual spending bills. However, Congress is not even required to pass a budget; and due to partisan wrangling, in many years it does not. Under the rules, action may begin on the annual spending bills even if the House and Senate have not agreed on a budget resolution by May 15.
Thus, while the president’s budget is a significant statement of executive branch priorities, it is merely the starting point.
Within that context, let’s look at the key takeaways:
- The administration’s budget proposal runs a $1 trillion+ annual deficit through FY2022. Rather than balancing the budget within 10 years as Republicans in Congress have proposed in recent years, President Trump proposes to balance the budget in 15 years based on relatively rosy economic assumptions.
- The Trump budget assumes the continuation of the spending caps in the 2011 Budget Control Act (BCA), which would force overall federal spending down by $126 billion. Congressional leaders have signaled their intent to raise these caps.
- Maintaining the BCA caps would require a 9% cut to domestic discretionary spending. Spending for Medicaid, Medicare and other mandatory programs is also proposed to be cut. Programs marked for growth include “funding for border security, national defense, opioids, law enforcement, childcare, veterans’ healthcare, emerging technologies that support the industries of the future, and workforce development.”
- The Trump budget would cut overall research and development spending by roughly $6.5 billion—or 5%. These cuts would primarily affect civilian agencies including the Dept. of Energy, NASA, National Science Foundation, National Institutes of Health, and others.
- President Trump is proposing to draw on “off-budget” funds from the Overseas Contingency Operations (OCO) to push through a 5%, $33.8 billion overall increase in defense spending. The move is controversial because the OCO was intended for combat operations and crises abroad.
- The Trump Administration is expecting GDP growth to hover around 3% for the next decade, while the Congressional Budget Office forecasts a decline in GDP growth from 3.1% in 2018 down to 1.7% by 2020 and then relatively flat through 2029. Federal Reserve Chairman Powell this week said growth appeared to be slowing from last year, “under the weight of the Trump administration’s trade war, economic slowdowns in Europe and China and fading stimulus from the Republican tax cuts of 2017” (New York Times, 3/21).
IPC is digging into the details of the President’s budget request, particularly with regard to DoD, Commerce, and EPA. We will work with Congress throughout the appropriations cycle to protect and improve programs of interest. Please let us know if you have any input on this.
Here’s a rundown of how some budget shifts could affect the electronics industry:
• Would invest $1.3 billion in grants to states for Career and Technical Education (CTE). The recently reauthorized Perkins CTE program helps students gain access to technical education, “including work-based learning during high school and a wide array of post-secondary options including certificate programs, community colleges, and apprenticeships.”
• Would eliminate the Manufacturing Extension Partnership (MEP) and Economic Development Agency, both of which support U.S. manufacturing initiatives.
• Would provide $688 million for the National Institute of Standards and Technology and prioritize research in quantum computing, artificial intelligence, and microelectronics.
• Significant increases for DoD R&D programs, including hyper-sonics, AI, and quantum computing. More defense R&D could be good news for defense supply-chain research and IPC’s efforts to secure funding for a five-year, $40 million program to help the defense industry move toward Pb-free electronics.
• Would cut the agency by $2.8 billion (31.2%), which if enacted could affect IPC’s effort to persuade the agency reduce reporting burdens on electronics manufacturers that send byproducts sent for recycling.
• Would give DHS a $3.6 billion (7.4%) increase to help support funding for 750 additional border patrol agents, 1,000 ICE officers, and 54,000 detention beds. The budget proposal would require all employers to use E-Verify program for worker authorization.
• Would eliminate the Advanced Research Project Agency–Energy (ARPA-E).
The U.S. budget process as it works today also revolves around those cliffhanger moments when Congress and the President must agree on a way forward or trigger government shutdowns or debt defaults.
The “meta” decisions are whether to raise the BCA spending caps and based on what understanding; how to handle the next debt-limit increase; and within those parameters, partisan wrangling over programs like the border wall, defense, and health and welfare programs. In short, this promises to be another raucous budget and appropriations year.