President Trump Releases 2018 Budget Proposal; Key Areas of Reform Target Financial Regulators, Cybersecurity, and Student Loans
On May 23, the White House released its fiscal 2018 budget request, A New Foundation for American Greatness, along with Major Savings and Reforms, which set forth the President’s funding proposals and priorities. The mission of the President’s budget is to bring spending under control by proposing savings of $57.3 billion in discretionary programs, including $26.7 billion in program eliminations and $30.6 billion in reductions.
Financial Regulators. The budget stresses the importance of reducing the cost of complying with “burdensome financial regulations” adopted by independent agencies under the Dodd-Frank Act. However, the proposal provides few details about how the reform applies to federal financial services regulators. Identifying the CFPB specifically, the budget states that restructuring the Bureau is necessary in order to “ensure appropriate congressional oversight and to refocus [the] CFPB’s efforts on enforcing the law rather than impeding free commerce.” Major Savings and Reforms assert that subjecting the Bureau to the congressional appropriations process would “impose financial discipline and prevent future overreach of the Agency into consumer advocacy and activism.” The budget projects further savings of $35 billion through the end of 2027, resulting from legal, regulatory, and policy changes to be recommended by the Treasury once it completes its effectiveness review of existing laws and regulations in collaboration with the Financial Stability Oversight Council. The Treasury review is being performed as a result of the Executive Order on Core Principals.
Dept. of Housing and Urban Development. As previously reported in InfoBytes, the budget proposes that funding be eliminated for the following: (i) small grant programs such as the Self-Help Homeownership Opportunity Program, which includes, among others, the Capacity Building for Community Development and Affordable Housing Program (a savings of $56 million); (ii) the CHOICE Neighborhoods program (a savings of $125 million), stating state and local governments should fund strategies for neighborhood revitalization; (iii) the Community Development Block Grant (a savings of $2.9 billion), over claims that it “has not demonstrated results”; and (iv) the HOME Investment Partnerships Programs (a savings of $948 million). The budget also proposes reductions to the Native American Housing Block Grant and plans to reduce costs across HUD’s rental assistance programs through legislative reforms. Rental assistance programs generally comprise about 80 percent of HUD’s total funding.
Cybersecurity. The budget states that it “supports the President’s focus on cybersecurity to ensure strong programs and technology to defend the Federal networks that serve the American people, and continues efforts to share information, standards, and best practices with critical infrastructure and American businesses to keep them secure.” Law enforcement and cybersecurity personnel across the Department of Homeland Security (DHS), Department of Defense, and the FBI will see budget increases to execute efforts to counter cybercrime. Furthermore, the National Cybersecurity and Communications Integration Center—which DHS uses to respond to infrastructure cyberattacks—will receive an increase under the budget.
Student Loan Reform. Under the proposed budget, a single income driven repayment plan (IDR) would be created that caps monthly payments at 12.5 percent of discretionary income—an increase from the 10 percent cap some current payment plans offer. Furthermore, balances would be forgiven after a specific number of repayment years—15 for undergraduate debt, 30 for graduate. In doing so, the Public Service Loan Forgiveness program and subsidized loans will be eliminated, and reforms will be established to “guarantee that borrowers in IDR pay an equitable share of their income.” These proposals will only apply to loans originated on or after July 1, 2018, with the exception of loans provided to borrowers in order to finish their “current course of study.”
Dept. of the Treasury. The budget proposes to, among other things: (i) eliminate funding for new Community Development Financial Institutions Fund grants (a savings of $220 million); and (ii) reduce funding for the Troubled Asset Relief Program by 50 percent, “commensurate with the wind-down of TARP programs” (a savings of $21 million).
Response from Treasury. In a statement released by the Treasury, Secretary Steven T. Mnuchin said the budget “prioritizes investments in cybersecurity, and maintains critical funding to implement sanctions, combat terrorist financing, and protect financial institutions from threats.” Furthermore, it also would “achieve savings through reforms that prevent taxpayer bailouts and reverse burdensome regulations that have been harmful to small businesses and American workers.”