Table Speech


The U.S. Budget Formulation Observed from Japan

August 9, 2017

Ph.D. Mieko Nakabayashi
Professor, Waseda University


 This morning, I was asked by a Japanese TV station to comment on the “Real News” video posted by President Donald Trump on his official Facebook page. This short video propagates the President’s accomplishments such as achieving economic growth and improving the employment figures. Hostility keeps escalating between President Trump and the media as he keeps criticizing the US mainstream media for publishing fake and biased news. President Trump is stuck in deadlock over both domestic and foreign affairs. Consequently, his approval rating has started to drop. I am sure he resorted to his own news video series to advertise his accomplishments and to attract his supporters.

 Now, the real work to be conducted by the President is to take concrete measures and implement the election manifesto. The President needs to pass legislation to enact his policy agenda with necessary budget allocation approved by the Congress. As I highlighted in my recent publication “President Trump and the U.S. Congress,” we should focus on the seesaw battle between the President and the Congress to better understand U.S. politics. I have worked over a decade as a staff member of the U.S. Senate Budget Committee under Senator Pete Domenici, an expert on budget and tax issues. I treasure my experience of analyzing the Budget Message submitted by the President to the Congress. Government workers in charge of drafting and preparing the Federal Budget are called “bean counters” and I surely enjoyed counting every single bean day after day with my colleagues as a team.

 President Trump’s snail-paced Budget formulation is partly due to numerous key governmental positions still left vacant to date. From his address to the joint session of the Congress on 28th February up to the submission of the Budget Message on 23rd May, President Trump had articulated different ideas including tax cuts. But there has been no progress made ever since. Many people started to question President Trump’s competence for office as he failed to pass the Obamacare repeal and replace bill, stumbles over the huge tax reduction plan and lags behind on his one-trillion-dollar infrastructure pledge. On top of this, I must highlight the biggest issue that awaits in the next few months is whether the Trump Administration will suspend the national debt ceiling currently set at 20 trillion dollars to allow unlimited Federal borrowing. In fact, the Treasury Secretary Steven Mnuchin recently urged the Congress to lift the debt ceiling by 29 September to prevent the government from defaulting on its obligations.

 Now, what impact will the U.S. Budget formulation give on Japan? If the U.S. defaults on its debts, the global economy and business climate will be adversely impacted. In addition, the value of the U.S. dollar would definitely plummet in the longer term and undermine stability of the Japanese yen. As the fiscal year starts on October 1st in the U.S., we must also keep a close eye on the fierce deliberations to unfold throughout September regarding the Budget formulation.

 The U.S. House of Representatives managed to approve the so-called “minibus” package of 12 appropriations bills for the discretionary spending, covering about one-third of the Federal Budget. Lawmakers merged the bills to have them pass the House shortly before leaving for their summer recess and to avoid government shutdown. Currently both Houses of the Congress are in recess up to September 4th. By the time deliberations resume, there will be only a dozen days left to vote on the bills as the current fiscal year concludes at the end of September.

 President Trump has a daunting task ahead to exert leadership over the Congress. He must immediately fill the enormous staffing gap, including numerous key governmental positions, to ensure smooth Budget negotiations between the Congress and various departments and agencies. He has no time to waste over internal strife and he must forge a consensus among congressional Republicans.

 We must not forget that the U.S. Midterm Elections will take place in November 2018. I think all the political horse-trading will come to center around the upcoming elections. My biggest concern now is that the Republican Party may transform into a more populist, protectionist party that is skeptical of free trade. Traditionally, the Democratic Party has advocated for protected trade while the Republicans have embraced the free trade doctrine. The fact that Donald Trump who was somewhat an “outsider candidate” won the election partly due to his protectionist campaign rhetoric, I can see many others will try to follow his path. If both the Democratic and Republican Parties come to advocate for protectionism in their election campaigns, it means the entire country will change its course. I must say the future looks uncertain. Rotarians are the leaders with different backgrounds and experiences. I hope you keep a close eye on the changes to unfold within the Republican Party and how they could affect the coming Midterm Elections.