After two months of mostly rhetorical posturing and a series of delays on the most visible campaign promises, the Trump Administration is in the process of submitting its first federal budget. In the corridors of Washington, DC, the term for this budget has been the “skinny” budget.
While most of the detail on the budget has not yet been revealed at the time of this article, a lot of significant discussion about what is anticipated has already occurred. Why is this important to inbound tour operators?
The federal budget sets up many of the parameters about how government services will be delivered, whether there will be tax relief, and what priorities are going to be emphasized. The perception of these decisions can have either direct or indirect impact on how inbound tour operator companies will function, whether there will be more profitability, and how the United States is seen as an attractive destination.
Two big items anticipated in the budget which will have some impact on the perception of the United States are the high visibility issue of constructing a wall on the Mexican border and an increase in the proposed defense budget of $54 million.
The border wall, which is now clearly not going to be funded by Mexico, has a very direct perception of less than a full welcoming message, particularly to the LATAM markets. The anticipated cuts in such agencies as the Coast Guard and the Transportation Security Administration to help fund the wall will create a confusing message at best regarding national security.
The increase in the defense budget, even though the United States now spends more on defense than the next seven nations combined, might underscore the posture of our country to confront terrorism or, if misinterpreted, to freeze visitation from some parts of the world to curtail the possibility of terrorists gaining entry. The two Executive Orders describing travel ban terms have already laid the groundwork for those interpretations. Many travel industry organizations and numerous travel sector media outlets have reported an impact of reduced visitation from these orders, which is often called the “Trump Slump.”
Additionally, operating parts of the budget which have a direct impact on tourism will be closely examined to see how proposed funding will impact international inbound travel. In this area, IITA members should pay close attention to the appropriations proposed for the national parks and other public lands and how large the recommended infrastructure program will be, as well as how it will be funded. Several reports indicate that there will be a significant reduction in the federal work force.
National parks are already operating below the level of appropriations ten years ago in constant dollars in terms of both personnel and programs. Infrastructure needs are at $12 billion, which thankfully is being supported by new Interior Secretary Ryan Zinke for full implementation, if the trillion dollar infrastructure proposal is approved.
At this point, however, the funding for that significant infrastructure proposal is in heavy discussion. House Transportation Committee Chairman Bill Shuster, Republican of Pennsylvania, wants to see it move this year, but there are others saying that it will take until 2018 to develop a funding strategy which can work its way through Congress.
Inbound operators should pay particular attention to this item, as transportation infrastructure investment has the broadest bipartisan support of any of the Trump Administration initiatives. Travel industry leaders are virtually unanimous about this item, particularly if it addresses the need for airport modernization and expansion with new intermodal connectivity to downtowns in key destinations.
While the proposed budget will identify anticipated revenue, any tax law changes must be approved by separate legislation. This will be another opportunity for input from IITA members.
While it is anticipated that changing health care from Obamacare to a program designed by the Republican majorities in both houses will take a lot of the media visibility in the short term, IITA members are encouraged to review the proposed budget for these items and others which will impact their businesses and share their opinions and priorities with IITA, so we can be part of the national discussion.