An Unpopular and Unpopulist Bill

June 5, 2025

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My spell-checker says that “unpopulist” is not an actual word. Maybe it should be. Americans have a right to ask whether the “One Big Beautiful Bill” passed by House Republicans fits any reasonable definition of populist politics.

The bill’s main objective is to extend the income tax cuts of 2017, whose benefits went especially to upper-income taxpayers. This is expected to cost the government over $2 trillion in revenue over the next ten years. The bill sacrifices over $2 trillion more in other tax deductions and credits, the largest ones being an increase in the standard deduction and the child tax credit.

Many of President Trump’s other tax proposals are also in the bill, although with less impact—deductions for overtime pay, tip income, and car loan interest, plus an extra credit for seniors (but not the exclusion of Social Security benefits from taxable income that he promised). Some of these proposals will make little difference to low-income people because they are already in a very low tax bracket.

In addition to costing the government trillions in revenue, the bill adds about $300 billion in spending on national defense and immigration control. That brings the total cost to about $5 trillion over ten years.

The bill offsets about half of that projected cost with spending cuts. The largest of these are cuts to Medicaid, clean energy and other climate initiatives, student loan forgiveness, and food assistance. The costs that are not offset with spending cuts will add to annual deficits and the accumulation of debt.

Deficits and debt

The deficit is already almost $2 trillion a year. Even if Congress passes no legislation and the 2017 “temporary” tax cuts are allowed to expire, the annual deficits will add close to $20 trillion to the national debt over ten years. I put “temporary” in quotes because Republicans have never seen a tax cut they didn’t want to make permanent. Passing this bill is projected to add another $2.4 trillion to the debt. It could be worse, however, since the bill contains its own “temporary” tax cuts that might be made permanent too, adding another $1.6 trillion to the debt.

Starting from today’s national debt of $37 trillion, the total debt by 2035 could be as much as $61 trillion (37 + 20 + 2.4 + 1.6).

The opposition

In Congress, reaction to the bill is divided sharply along party lines, and the Republicans’ small margins in both houses may be enough to get it passed. But in the real world outside of Congress, opponents of the bill are speaking out from across the political spectrum.

Fiscal conservatives worry about the continued accumulation of debt and its size in relation to the U.S. economy. At $37 trillion, the debt is already larger than the $30 trillion GDP. If the debt grows to $61 trillion while the economy grows only to $40 trillion—a reasonable projection—the ratio of the two will go from 1.2 to 1.5. That places a larger burden on the country to finance the debt. Paying the interest on the debt would get in the way of achieving other fiscal goals, and the demand for financing could raise interest rates on home mortgages and other loans. Even worse would be a default on the debt, or a refusal of lenders to buy government bonds at less than a “junk bond” rate. Either could seriously undermine the value of the dollar.

Liberals complain that we are cutting taxes for the rich while cutting spending on programs that help the poor. The cuts in Medicaid would deprive over ten million people of health insurance, place a burden on hospitals and nursing homes that serve them, and contribute to more closures of such institutions, especially in rural areas. Liberals worry that elimination of clean-energy initiatives will contribute to global pollution and dangerous climate change. It will also throttle a growing industry, cost thousands of jobs, and solidify China’s lead in solar power and electric vehicles.

Republican leaders like House Speaker Mike Johnson respond to these criticisms by minimizing the impact on the deficit and the welfare of citizens. Johnson repeats the tired argument that tax cuts pay for themselves by growing the economy, which few economists today find consistent with the evidence. A half century of Republican tax cutting has been a major contributor to rising debt, along with bipartisan stimulus spending to recover from the Great Recession and the Covid pandemic. Republicans portray the people who will lose Medicaid coverage either as illegal immigrants who weren’t eligible in the first place, or people who “choose” (Johnson’s word) to leave the program rather than meet reasonable work requirements. Apparently they have no problem depriving children of health insurance or food assistance if their parents are undeserving.

The DOGE fiasco

The biggest beneficiaries of this bill—and its most enthusiastic supporters—are wealthy Republican donors. They are most responsible for making tax-cutting the overriding mission of their party. One glaring exception at the moment is Elon Musk, who spent $300 million getting Trump and other Republicans elected, but is now trying to kill the “One Big Beautiful Bill.”

I won’t probe all of his motivations, which may include his stake in electric vehicles, but I would like to connect his position with his experience with the Department of Government Efficiency (DOGE). Trump anointed Musk the leader of a well-publicized budget-cutting initiative. They imagined savings of up to $2 trillion a year, wiping out the current budget deficit. So far, the savings have been negligible, for several reasons. First, the President does not really have the legal authority to close down agencies or impound money allocated by Congress. Second, finding “waste, fraud, and abuse” to cut isn’t as easy as people think. Careless cutting quickly impairs the functioning of agencies people care about, like the Veterans Administration, the Social Security Administration, or the National Institutes of Health. Third, even people who are unenthusiastic about a government operation like foreign aid are not thrilled to hear about a sudden increase in starving children. Fourth, some savings are offset by the cost of paying employees to quit, or rehiring them when they turn out to be needed after all. And fifth, overall government spending is not really falling, just being shifted to other functions like deporting immigrants.

I think that DOGE has largely been a budget-cutting charade. Maybe Trump thought that if he could establish his credentials as a budget cutter, he could sell his “One Big Beautiful Bill” as an exercise in deficit reduction. He claimed in one of his posts that it is a big step toward a balanced budget, which will come as a surprise to anyone who has examined the numbers. But now the jig is up. The bill’s cover is blown. We’re back to business as usual, where Republicans cut taxes, raise deficits, and cut spending on the poor. While Trump is going all in with support for the bill, Musk seems disappointed that he didn’t really get to cut hell out of the federal budget, no matter who gets hurt. Trump is more interested in cutting taxes for himself and his wealthy friends. Neither is much of a populist.

The more things change…

I am beginning to wonder whether the MAGA movement is truly transformative for the Republican Party, or if it is mostly a propaganda campaign to trick people into supporting the same old agenda that most people rejected in 2012. Romney and Ryan lost by running on tax cuts for the rich and benefit cuts for the poor. Trump won by running on saving American jobs from foreigners and cutting prices. But when he works with Congress at all—that is, when he’s not trying to rule by executive decree—his top legislative priority is more of what Republicans have been selling for years. Did someone say Trump was the change candidate?

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Posted by Ed Steffes

Turning Back the Clock on Trade

April 7, 2025

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We are only three months into Donald Trump’s second term, and we can already see how much destruction he is willing to unleash in pursuit of American greatness as he imagines it. He is proving to be much better at tearing things down than building things up.

To address the challenge of making government more cost effective, he demolishes whole agencies and fires thousands of employers with little regard for their competence or the importance of their work. To address the challenge of mass migration from poorer, more violent countries, he tries to shut down immigration almost entirely and deport migrants whether they are dangerous criminals or potential good citizens. To face the challenge of making American workers and their products competitive in global markets, he launches a trade war that risks global trade contraction and recession. In each case, his legal authority to do these things is dubious and contested.

I think the underlying problem here is a nostalgic or backward-looking worldview, combined with a disrespect for democratic process. When Trump and his MAGA supporters think about how to make America great, they think of the country as it used to be long ago, perhaps the 1920s or the late nineteenth century. In those days, the federal government was smaller and did a lot less. We had no Social Security or Medicare, no Environmental Protection Agency, civil rights legislation, or collective bargaining rights. Our immigrants were mostly from Europe, and restrictive legislation of the 1920s aimed to keep it that way. With American manufacturing expanding rapidly, we could look to our domestic industries to meet our needs. Trump and his supporters would rather try to turn the clock back than live in the world of today.

That is why Trump is bringing back the old and largely discredited policy of massive tariffs. His proposed numbers would raise the average tariff on foreign goods from about 2 percent to 22 percent. That is even higher than the notorious Smoot Hawley tariff that economists blame for worsening the Great Depression of the 1930s. Contrary to the historical evidence, Trump blames the Depression on a decline in tariffs, since he claims that tariffs made other countries finance our government. Tariffs are actually a tax on importers and their customers.

Why Tariffs?

The Trump administration has given many rationales for high tariffs. They can sound pretty good, especially when accompanied by the half-truths and rhetorical flourishes of a master marketer. But they do not stand up very well to economic facts and analysis. Supposedly, the tariffs will help negotiate fair-trade agreements, bring in needed revenue, and rebuild domestic manufacturing. Let’s consider each of these objectives in turn.

Negotiate free-trade agreements?

One aim is for the Trump administration to use tariffs as a bargaining chip to make our trading partners treat us more fairly. We threaten them with tariffs, but if they will remove their trade barriers to our goods, we will remove our trade barriers to theirs. This makes a certain amount of sense in cases where other countries are caught engaging in unfair trade practices. One example is “dumping,” the practice of selling a large volume of product at artificially low prices—below cost or below the price in their own country—to drive their competitors out of business. Tariffs that are only bargaining chips may well turn out to be temporary, and they could actually increase global trade rather than curtail it.

But Trump’s enthusiasm for tariffs seems to go far beyond that. One big clue is that he has put a minimum 10% tariff on every country, regardless of its trading practices. In addition, he has added a “reciprocal tariff”—a highly misleading term—to sixty countries, simply because we have a trade deficit with them.

That is obvious from the way the administration estimates the trade barriers erected by each country. It uses a novel formula that most economists find rather silly. The formula takes our trade deficit with a country and divides it by the amount of that country’s exports to us. The result is the percentage of exports to the United States that are not balanced by imports from the United States. For the European Union that figure is 39%, for India 52%, for China 67%, for Vietnam 90%. The administration then assumes that the entire imbalance is due to tariffs and other restrictive trade practices. According to Trumpian logic, this would justify a tariff of the same percentage on the other country’s goods. But since we want to be “nice,” we will impose a tariff of only half of that, such as 26% instead of 52% on India.

Confused? You should be. This is not really a reciprocal tariff, since it is rarely equal to any actual tariff other countries impose on us. Think of it more as a punishment on a country for selling us more than it buys from us, for whatever reason.

The underlying assumption here is that our trade imbalances are inherently unfair—to us. But think about it. Americans use their wealth and their strong dollars to buy products from all over the world, some of which we simply don’t produce here. We get the benefit of a lot of stuff. Our trading partners get access to the world’s dominant currency, which they can either save and invest or spend where they like. They have any number of good reasons for saving dollars—often buying treasury bonds backed by the full faith and credit of the U.S. government—or spending them on some other country’s goods. Maybe they need to buy less expensive goods than ours. Maybe they have product preferences, like preferring smaller, fuel-efficient vehicles to our gas-guzzlers. Why punish either Americans or foreigners for shopping where they please?

Another problem with the tariff formula is that it considers only goods, where the U.S. runs a deficit, and not services, where we run a surplus. That exaggerates the deficits and punishes countries for selling us clothing or cell phones, while failing to credit them for buying our financial services or software.

In Trump’s extravagant rhetoric, the whole world has been beating up on us for a long time. “Our country and its taxpayers have been ripped off for more than 50 years.” And, “For years, hardworking American citizens…were forced to sit on the sidelines as other nations got rich and powerful, much of it at our expense.” Some Americans are on the sidelines, having lost their jobs to foreign competition, and I will get to them shortly. But the idea that other countries have been getting rich at our expense is contradicted by the continuing American supremacy in average wealth and income. For all of China’s advances, our per-capita GDP is still six times as great as theirs. Fareed Zakaria criticizes Trump’s “nostalgic fantasy” that we were relatively better off in the Gilded Age, with its higher tariffs, than we are now. “In 1900, the United States accounted for about 16 percent of the global economy by one measure; it is now about 26 percent of it.” Trump seems willing to blow up the global trading system, based largely on his misconception that the United States is becoming a “loser” among the world’s nations.

Bring in needed revenue?

After allegedly being left behind by other countries, Trump says that “it’s now our turn to prosper and in so doing, use trillions and trillions of dollars to reduce our taxes and pay down our national debt.” That way of putting it glosses over the fact that tariffs are themselves taxes that will be paid by American importers and largely passed on to their customers. We will pay them in the form of higher prices for shoes, clothing, furniture, appliances, electronics and other items manufactured abroad. (And before we’ve even started paying them, the hit to the stock market is also costing us trillions in retirement savings.)

How much revenue those new taxes generate for the national treasury will depend on how much Americans continue to import, as opposed to either substituting domestic goods or cutting back spending. Out of one side of his mouth, Trump talks about the trillions to be collected, while out of the other side he talks about how people can avoid those costs by buying American.

The promise to pay down the national debt is hard to take seriously, considering that the revenue from tariffs will probably be more than offset by other revenue losses from the administration’s policies. Republicans are soon to unveil their plan to increase the debt ceiling to extend the 2017 tax cuts and probably add new ones. In addition, the elimination of thousands of IRS jobs is expected to weaken the agency’s ability to collect what taxes are owed. Even if we think of tariffs as just a substitute for other taxes, that does not make them a good idea. They are among the most regressive of taxes, since they especially hurt low-income consumers who spend their income on inexpensive imports to make ends meet. Cutting income taxes while raising import taxes tends to shift the tax burden away from the rich and toward the poor. Like many of his policies, tariffs will hurt many of the working-class families he promised to help. And If the Republicans make good on their threats to cut Medicaid and other “safety-net” programs, low-income Americans will get a double whammy of higher costs and reduced benefits.

Rebuild domestic manufacturing?

The dominant theme in Donald Trump’s rhetoric about tariffs is the aim to rebuild America’s manufacturing economy. The globalization of trade has allowed other countries to supply more of the manufactured goods that used to be made in America. Our job losses have been greatest for workers with limited educations and for small towns that relied on one or two factories for their employment base. Trump places the blame mainly on the countries that gained manufacturing jobs, describing them as raping and pillaging America.

Tariffs on foreign goods could bring some manufacturing jobs back, but probably not as many as the Trump administration hopes. Domestic manufacturing industries with underutilized capacity, notably the automobile industry, might add some jobs quickly. (That’s why the President could pack his rollout event with UAW workers who applauded the tariffs.) However, even these industries rely on global supply chains for many of their components. Tariffs will increase their costs, and passing those costs on to customers may hurt their sales. In addition, retaliatory tariffs will hurt their sales in other countries. As David J. Lynch wrote in the Washington Post:

…Trump’s hopes of repatriating all of the manufacturing capacity that moved offshore during globalization’s heyday will almost certainly be disappointed, economists said. The average car, for example, contains about 30,000 parts with roughly half coming from abroad. Activating the domestic suppliers capable of producing those may take years and cost billions of dollars.”

For products that we haven’t made in America for a long time, like sneakers, U.S. manufacturers would have to play catch-up. The task of creating factories and supply chains would be even harder and take longer. American companies are unlikely to invest the billions of dollars required to expand manufacturing capacity unless they are confident that the tariffs will remain in place for a few years. But they are so unpopular with both economists and consumers that Congress or a new administration could easily reverse them. So could the courts, since Trump chose to declare a national emergency and impose them unilaterally instead of working through Congress.

The larger issue involves global economic trends. Manufacturing capacity has been growing in the rest of the world, while the manufacturing share of global economic work has been falling, due to automation. More American jobs are being lost to automation than to outsourcing. So our efforts to increase manufacturing jobs run up against two powerful limits: An increasingly hi-tech economy does not need as many manufacturing workers, and the United States cannot expect to regain the dominance in manufacturing that it enjoyed after World War II.

If not tariffs, what?

The good news is that the American economy has remained relatively strong despite the lost manufacturing jobs. It has survived the increase in global competition, the Global Financial Crisis, and the pandemic. Both times Trump took office, he inherited an economy that was coming back strong after a previous crisis. Now he threatens to create a new crisis by trying to take us back to a bygone era.

A more realistic approach to the future would be to acknowledge that we are predominantly a service economy, and build on that strength. We should not abandon manufacturing, but we should compete fairly on price and quality, not start trade wars. What tariffs we impose should be carefully targeted to sanction unfair trade practices. Maintaining or increasing America’s share of the good service jobs being created requires that we invest heavily in the health and education of our work force, especially the portion of the work force that has been left behind. The Trump administration seems to be doing the opposite, cutting funding for everything from cancer research to assistance to poor school districts. I doubt that this approach will make America greater, but it can make us poorer.

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Posted by Ed Steffes

Fiscal Fantasyland

March 10, 2025

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Based on President Trump’s first six weeks in office, I would say that he has yet to make the transition from campaigning to governing. He is a pretty effective campaigner, for those who can stomach his incessant lying, self-aggrandizement and ugly attacks on opponents. But he is not yet serious about addressing the country’s domestic issues, especially the serious decisions it faces about taxing and spending.

The President’s recent address to Congress was his typical campaign stemwinder, full of bluster and bombast but largely devoid of realism or reasoned argument. On fiscal matters, it repeated the kind of campaign promises one might expect from a campaigner who has not yet had to confront fiscal realities.

First, he would like to make his 2017 personal income tax cuts permanent. The cuts were unpopular at the time because the benefits went mainly to the wealthiest taxpayers. Congress set them to expire after eight years to soften their impact on the ten-year debt projections that accompany every budget. The annual deficits and cumulative debt shot up anyway, but Congressional Republicans have always been determined to continue the cuts, come what may.

On top of the 2017 tax cuts, Trump would like to add trillions of dollars in additional cuts. These include deductions for tip income, overtime pay, Social Security income, and interest payments on car loans for American-made cars, plus restoration of the unlimited deduction of state and local taxes and another reduction in corporate taxes. Despite the lost revenue from all those tax cuts, Trump promised to balance the federal budget “in the near future.”

Sounds fantastic—more tax cuts and a balanced budget! But beware—“fantastic” is the adjective form of the word “fantasy.” Republicans cheered the address, especially when they heard the words “balanced budget.” But they know that they have no intention of passing anything close to that. Their own proposals would take the country in the opposite direction, toward larger deficits and more debt. In fiscal fantasyland, we can cut all the taxes we like, but then balance the budget quickly and rather painlessly. We just need to crack down on “waste, fraud, and abuse,” to use one of the political campaigner’s favorite phrases. Right-wing politicians love to portray the federal government as an overfed animal that would benefit from an austerity diet. Promoting that image is a good way to get people to hate their own democratic government, the government that wastes their money without working very well for them. Leaders who make a big show of fighting waste establish their fiscal virtue, which then gives them a license to cut more taxes. But the adjective form of “license” is “licentious,” defined as “lacking legal or moral restraint.” Isn’t there something licentious about the glee with which the world’s richest man takes a chain saw to our government agencies, so that we can pretend to afford more tax breaks for people like him? Does it really matter to him how much of the alleged waste is real, as long as the show goes on?

Stubborn facts

Those of us who are wary of fiscal fantasies and struggle to live in the real world must acknowledge some stubborn facts.

When tax cuts exceed spending cuts, deficits and debt go up.

The 2017 tax cuts added several trillion to the national debt, and making them permanent would add several trillion more. That’s why Republicans who voted against raising the debt ceiling during the Biden presidency have done a 180-degree turn and are now supporting it. Including any of Trump’s additional tax cuts would further widen the gap between revenue and spending.

So-called “supply-side” economists used to argue that tax cuts pay for themselves by stimulating economic growth and expanding the tax base. Economists have found this effect to be too small to offset the impact of tax cuts on deficits and debt.

Tax-cutters have also held out the hope that the cuts will force Congress to enact offsetting spending cuts. In fiscal fantasyland, Congress can cut taxes first and leave spending cuts to the imagination. In reality, the imagined cuts usually turn out to be too small to make much difference or too unpopular to be carried out. The spending cuts proposed by the House budget resolution are less than half of their proposed tax cuts.

The savings from fighting “waste, fraud and abuse” are disappointing.

Everyone is against “waste, fraud and abuse,” but finding enough of it to offset massive tax cuts has proven to be very hard. Trump claimed in his address that Elon Musk’s Department of Government Efficiency—itself a fantasy department with no basis in law—has already found “hundreds of billions of dollars of fraud.” He must have pulled that number out of thin air, since DOGE’s announced savings at that point were less than ten billion, and that included many jobs and contracts terminated without any charges of fraud. Trump’s equally fanciful claim that millions of dead people receive Social Security checks has been thoroughly investigated and debunked.

Even when fraud is real, the government is often the victim rather than the perpetrator. Defense contractors inflate costs; medical providers file Medicare claims for services they did not actually provide; taxpayers cheat on their tax returns. Taking on the private interests that rip off the government is hard, and firing federal workers usually won’t help. In some cases, adding workers is more productive, such as IRS auditors to catch more tax cheaters.

The DOGE firings and contract terminations are a kind of budgetary side show anyway, since they try to stop agencies from spending money Congress has already allocated. That’s one reason they are facing so many legal challenges. What matters more is what spending cuts Congress is willing and able to write into law. Of course we want our government agencies to be more efficient, but we can achieve that only by careful program evaluation and innovation, not by eliminating workers and contracts indiscriminately. Overly hasty cuts undermine worthy goals, such as medical research, clean energy initiatives, airline safety, global disease prevention, services to veterans, and consumer protection. Every program that benefits a sizable segment of society has its vigorous defenders.

Offsetting large tax cuts is hard without cutting federal insurance programs.

One reason why spending cuts save so little is that they focus on such a small segment of the total budget. The budget cutters go after nondefense discretionary spending (only 14% of the budget), especially what is paid to the civilian labor force (only 5%). Defense spending is larger, but there the administration is sending mixed signals. The President and his Defense Secretary call for spending reductions, while the House budget resolution proposes an increase.

The rest of the big bucks are in the large federal insurance programs, particularly Social Security, Medicare, and Medicaid. Although Congressional Republicans are reluctant to call attention to it, their budget plan calls for the committee overseeing those programs to find large savings there. According to the Congressional Budget Office, they cannot meet their tax-reduction and debt-ceiling targets without looking there.

Medicaid seems most vulnerable to cuts, since it serves a lower-income—and politically less powerful—constituency than Social Security or Medicare. But cutting it would be politically unpopular, since it serves a large portion of the nation’s children, elderly residents of nursing homes, and the disabled. Medicaid payments also keep many rural hospitals in business. Cutting Medicaid would give credence to the charge that Republicans want to cut benefits to the poor to give tax cuts to the rich.

Social Security and Medicare are a different matter, since they are funded by payroll taxes. Some reform is inevitable, to deal with a potential revenue shortfall as the retired population grows. But cost savings should go to keep the programs solvent, not to justify or fund cuts in income taxes.

The federal safety net is popular and necessary.

One may ask why the citizens of one of the richest countries in the world rely so heavily on federal insurance programs to make ends meet. Part of the answer is that the United States has a weakly organized working class and an embarrassing number of jobs with low wages and no benefits. Far too many Americans lack the means to pay for their own health insurance or save for their own retirement. Critics may worry that Americans are too dependent on government, but that may be the flip side of the economic power and privilege at the top. We expect privileged taxpayers to share some responsibility for the wellbeing of the whole society. At least some of us still do.

Let the tax cuts expire

The first step out of fiscal fantasyland is to question whether the country can afford letting the 2017 tax cuts continue. In both 2017 and 2025, the Trump administration inherited a growing economy that did not need that stimulus.

But tax cutting remains the top priority for Republicans, no matter how much they talk about deporting immigrants, fighting inflation, eliminating DEI programs, or anything else that appeals to the MAGA base. With Republicans in charge of the government, the fiscal dilemma is their dilemma. Unless they change their tax-cutting ways, they must either vote for the debt increases they claim to hate, or cut programs that Americans want, or both. No wonder they would rather live in fiscal fantasyland.

I should add that I am not really a deficit hawk, since in recent years the economy has handled federal deficits better than many economists expected. Nevertheless, the debt does have some downsides., especially for government itself. It forces the government to devote a big chunk of its budget to paying interest instead of providing services. And it gives conservatives an excuse to go on periodic cost-cutting rampages that can do more harm than good. That’s what I believe we are seeing now.

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Posted by Ed Steffes

Lawless Inefficiency

February 10, 2025

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We are now three weeks into the second Trump presidency, and I have been trying to organize my thoughts about the firehose of executive orders spewing out from the new administration. I will focus on two of the things that bother me most.

The first is that many of the executive orders and actions are arguably illegal, and those arguments are being made in court.  Often that is because they appear to violate the separation of powers between the executive and legislative branches of government mandated by the Constitution. My second concern is that the President is trying to market many of his most radical measures as exercises in government efficiency, an appealing but misleading notion. In practice, they seem more about getting rid of programs and agencies that Donald Trump and Elon Musk do not like. Musk’s Department of Government Efficiency (DOGE), itself created by executive order rather than by Congressional legislation, might be more accurately named the Department of Government Obstruction.

Beyond the law

Article I of the U.S. Constitution clearly gives Congress the sole authority to levy taxes and approve expenditures. No money can be spent without congressional approval, and approved funds must be spent as Congress directs. Spending money the way Congress intended is part of the President’s responsibility to “take care that the laws be faithfully executed” (Article II, Section 3).

The Congressional Budget and Impoundment Control Act of 1974 reaffirmed Congress’s budgetary control, after President Nixon tried to impound some funds Congress had allocated. The law did leave the President a little wiggle room by allowing some temporary pauses in spending under special circumstances. But even then, the President must report to Congress and give it an opportunity to weigh in.

Shutting down an entire agency by executive action appears to exceed the President’s legal authority, let alone the authority of an unelected and congressionally unapproved associate like Elon Musk. The Agency for International Development was created by Congress over 60 years ago and has been funded with bipartisan support ever since. It has saved millions of lives by fighting hunger and disease around the world. It has also built enormous good will for our country and helped American farmers by buying and distributing their products. Something is very wrong when a president can destroy in a few days what took decades to develop, and do it without so much as a congressional hearing.

Musk has already announced the death of two other federal entities, the Department of Education and the Consumer Financial Protection Bureau. The Education Department provides financial assistance to underfunded schools, funds much of the country’s special education, and administers the student loan program, among other things. The CFPB has saved consumers billions of dollars by cracking down on shady business practices, such as hidden fees imposed by banks.

Of course, we should not be too surprised if a president with a history of indictments and one multicount felony conviction tries to run a lawless administration. During his campaign, Trump talked about being a dictator, and voters should have taken him seriously.

In the name of efficiency

President Trump and his supporters have tried to pass off the most destructive executive decisions as a normal quest for government efficiency. Here is how House Speaker Mike Johnson defended the USAID spending freeze at a recent press conference:

There’s a gross overreaction in the media to what’s happening. The executive branch of government in our system has the right to evaluate how executive branch agencies are operating. It’s not a power grab. That’s what they’re doing—by putting a pause on some of these agencies and by evaluating them, by doing these internal audits. That is a long overdue, much welcome development. We don’t see this as a threat to Article I at all. We see this as an active, engaged, committed executive branch authority doing what the executive branch should do.

Is the aim here really “to evaluate how executive branch agencies are operating,” or is it to impede their operation, maybe permanently? Sending USAID workers home, shutting down the headquarters, taking down the website, and even taking the name off the building are a strange way of evaluating an operation. Would a private company shut down all its production and sales if it intended to remain in business? I thought Republicans wanted federal agencies to run more like businesses; not go out of business!

Efficiency is about getting the best ratio of benefits to costs. Improving efficiency by increasing benefits and/or cutting costs is a challenging task. If taken seriously, it requires working within agencies to find ways of doing things better but less expensively. Sometimes it requires large short-term investments for the sake of long-term payoffs, as when an agency replaces antiquated technology.

We are not hearing much about improving government operations, just cutting them. But cutting costs without regard to the impact on results is not efficient. Consider the President’s “Deferred Resignation” plan, where federal employees can resign now but keep getting their pay and benefits for another seven months. It makes no distinction between the most qualified, productive workers and the least. Is it efficient to pay good workers to leave instead of paying them to keep working? Is it efficient to hire a new worker to do a job, while still paying the old worker not to do the same job? Just getting rid of as many workers as possible appeals to antigovernment ideologues who have trouble imagining federal employees as good workers doing anything important.

Much of the work of Musk’s Department of Government Efficiency is shrouded in secrecy. His workers are mostly young technicians who know a lot about computers, but have less knowledge, experience, or appreciation regarding the government agencies they are supposed to overhaul. When they descend on a department brandishing their butcher’s knives, we do not know whether they are cutting fat or meat, or if they can even tell the difference. Apparently, they just walk in the door and start ordering administrators to cut jobs and stop spending money on things that do not conform to the President’s priorities. Among the kinds of spending they say to stop are the clean energy projects authorized by the Inflation Reduction Act, not because they are wasteful, but because the President doesn’t acknowledge greenhouse gas pollution or climate change as problems. The cuts certainly seems to violate the Impoundment Act and the obligation of the executive to take care that the laws are faithfully executed. DOGE is designed to circumvent the normal congressional budgeting and oversight processes. Trump has also fired the Inspector Generals who are normally responsible for combating waste, fraud, and abuse. His people—or more precisely Musk’s people—will decide what is wasteful.

Remedies

The most obvious remedy for an executive branch run amok—or in this case, run aMusk—is for the legislative branch to reassert its Article I authority. The Republican leadership in Congress shows no interest in doing this. For whatever reason—ideological agreement or intimidation by their bully leader—they seem content to let Trump and Musk dismantle federal agencies. No doubt many Republicans are happy to accomplish by executive fiat what they have been unable to accomplish legislatively, such as killing clean energy and consumer protection.

The third branch of government, the judiciary, is showing signs of life. A number of judges have responded to the many lawsuits already filed by issuing temporary restraining orders, pending hearings on the legal objections. (As I write this, I have just heard that a judge has accused the administration of violating his previous order to stop freezing spending.) Trump, Musk, and Vice President Vance have responded by attacking the judges, with Musk calling for their impeachment. We may be headed for a constitutional crisis, where the President refuses to be bound even by court orders.

No matter what Trump does, removing him from office before his term expires seems a remote prospect, since the Supreme Court has granted him immunity from prosecution and members of his own party will not vote to impeach him. Removal by means of the 25th Amendment would require cooperation of the cabinet, now well-stocked with loyalists who are as extreme as he is.

That leaves public opinion. One reason why Trump and Musk chose USAID to begin their anti-government crusade is probably that foreign aid does not have a very large domestic constituency. Polls have found that Americans grossly exaggerate how much we spend on it—actually about one-half of one percent of the federal budget—and wonder why we do not spend that money at home. As the demolition derby extends its efforts to other targets, Americans may discover how much federal spending impacts their own communities. When budget cuts start hitting local hospitals, schools, farms and construction projects, the administration may discover that cutting spending is much more popular in the abstract than in the concrete. A little civic education might turn out to be the silver lining of the dark cloud that hangs over the country.

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Posted by Ed Steffes

Holding the Center

November 26, 2024

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The latest issue of The Week has a cover depicting several of Trump’s cabinet appointees setting off explosives. The caption is “The Wrecking Crew: How Trump’s nominees could blow up the government.”

The conventional wisdom has been that in a two-party system, the winning party is the one that manages to straddle the center. It is the one that avoids the extremes and appeals more to the large middle of the electorate. Of course, that can be easier said than done. When society is more polarized, middle ground is harder to find. In addition, the center is a moving target. Policies that were once considered extreme, like Medicare or legalized abortion, have become more mainstream; and policies that were once considered normal, like segregation of the races, have become practically unmentionable. Nevertheless, election losses have often occurred when liberals got too far to the left of the voters—like George McGovern in 1972—or conservatives got too far to the right—like Barry Goldwater in 1964.

This year we have a more confusing situation. Many observers want to attribute the Democratic loss to the party’s excessive radicalism, putting them out of touch with “ordinary Americans.” And yet it is the winning party that seems more intent on blowing up the government. What’s going on here?

Radical-left Democrats?

Many of the post-mortems on the election fault the Democrats for endorsing too many unpopular ideas. A common accusation is that Democrats strayed too far from the bread-and-butter issues that interest most working-class voters (often defined as the non-college-educated). That left room for Republicans to claim more of the middle ground, perhaps becoming the new party of the working class.

On some issues, such as protections for transgendered persons, the Democratic position does appeal more to educated liberals than to the general public. However, let’s not forget that when Joe Biden got the Democratic nomination in 2020, he was considered a moderate Democrat, and one with a strong record of supporting working-class interests. As Vice President and eventual presidential candidate, Kamala Harris stuck close to the Biden agenda, so much so that she was criticized for not putting more distance between them. Notice also that other Democrats with moderate positions and solid pro-working-class credentials—Sherrod Brown in Ohio and Bob Casey in Pennsylvania—also lost this year. Democratic extremism seems hardly a good enough explanation.

Two developments early in the Biden presidency damaged his reelection prospects, a spike in inflation and a surge in illegal immigration. Covid played a role in both, creating supply shortages that raised prices and a backlog of migrants who came in only when Covid restrictions were lifted. Biden’s responses to these problems may have been less than fully successful, but they were hardly radical. He supported a bipartisan bill that would have increased border security and processed asylum applications faster, and he acted unilaterally to tighten security when the bill failed. He increased energy production to bring costs down, and supported the Federal Reserve’s use of monetary policy to reduce the rate of inflation.

Or radical-right Republicans?

I think that a fair comparison between the candidates shows Donald Trump and the MAGA Republicans taking the more radical positions. Trump was the one who asked Congressional Republicans to kill the bipartisan immigration bill, so he could keep the issue alive and gather support for his more radical solution of mass deportation. His major economic proposal, high tariffs on imports, has been out of the economic mainstream for the past century. Most economists believe that his policies would hurt the economy and raise costs for consumers. In foreign policy, Trump’s affinity for dictators places him at odds with our foreign policy establishment and pro-democracy forces within his own party.

As he ran for president this time, Trump was being prosecuted for one of the most radical actions in American history, trying to overturn the previous election by illegal means. He could only be reelected by convincing  most of his followers that (a) he had really won the 2020 election despite all evidence to the contrary, and (b) his indictments for this and other illegal behavior were nothing but politically motivated witch hunts.

How did a person so far outside the norms of political policy and behavior manage to capture the middle (almost), by getting just below 50% of the popular vote? One reason was the advantage of not being the incumbent this time. Incumbents have had a tough time winning lately, not only here but in other democratic countries. Voters are restless and dissatisfied, especially because the benefits of economic growth have been going mainly to the richest segments of society for the past half-century. Meanwhile, working-class families have been struggling to get ahead. Neither party has come up with a very good solution to this problem.

As the non-incumbent, Trump could make dubious claims about his proposals without having to test them in the real world, at least not yet. He could exaggerate the revenue gains from his tariffs while pretending that the costs would be borne by foreigners, instead of by US importers and their consumers. As details of the Republican Project 2025 plan came out, and the public turned against it, Trump could say, “I never heard of it,” while knowing full well that his own political associates and allies were writing it. Now he has put its co-author, Russ Vought, in charge of the Office of Management and Budget.

Perhaps most important, Trump had the support of a well-funded right-wing propaganda machine that constantly portrayed his opponents as dangerous radicals and “the enemy within.” He distracted attention from his own radicalism by constantly referring to Biden and Harris as “radical-left Democrats.” One of the campaign’s most effective ads claimed that Harris cared more about “they/them”—a reference to transgender pronouns—than about “us.” A negative campaign does not have to be fair or true to be effective.

How will Trump govern?

No one who follows the news closely should be surprised at the radicalism now on display in the Trump cabinet selections and policy proposals. (Some less informed voters may be scratching their heads and asking, “Is this what I voted for?”) But the federal government is a huge and complicated institution, one that does not change quickly. Many of Trump’s “concepts of a plan” may be too radical to implement fully.

Critics are pointing out that actually rounding up and deporting millions of migrants—and their children, even if they were born here?—would be prohibitively expensive, as well as very disruptive to many communities and industries, such as agriculture and construction. High tariffs on imported goods could also be very costly, especially if they trigger trade wars that hurt our own exports. Trump is promising 25% tariffs on imports from Canada and Mexico, our biggest trading partners, which would violate the existing trade agreement that Trump himself signed. However, his appointed Treasury Secretary, Scott Bessent, is said to be approaching tariffs more cautiously.

MAGA Republicans are now claiming a popular mandate to “dismantle the administrative state.” Half the popular vote is a shaky basis for claiming a mandate for anything this controversial. Thousands of federal workers staff the agencies that make and implement the day-to-day decisions that make the government work. They decide who gets prosecuted (DOJ), how to get the lead out of our water supply (EPA), what qualifies as a charitable deduction (IRS), what drugs get approved (FDA), who qualifies for assistance after a hurricane (FEMA), and on and on. The federal government is a huge employer, and many of these positions are good middle-class jobs that are important to the economy.

Dismantling the administrative state could mean many things, all of which are now under discussion:

  • Placing people in charge of agencies who have neither experience in managing large organizations nor much knowledge of the organization they are supposed to head
  • Reclassifying merit-based civil service jobs to make them political appointments rewarding ideological or financial support for the party in power
  • Centralizing decision-making in the White House, so that the President decides who gets prosecuted, who gets audited by the IRS, which states get disaster relief, and so forth
  • Impounding and refusing to spend money authorized by Congress for government agencies (technically illegal, but appealing to a rogue administration anyway)
  • Eliminating entire departments or agencies (such as favorite Republican targets like the Department of Education, the EPA, and the Consumer Financial Protection Bureau)
  • Drastically cutting the nondefense discretionary parts of the federal budget

Elon Musk and Vivek Ramaswamy have been asked to head a “Department of Government Efficiency,” oddly named because it will not be a real government department. Musk has claimed that he can cut $2 trillion dollars from the government’s $6.75 trillion budget. Critics are quick to point out that without cutting defense spending, Social Security or Medicare, which Trump has promised to protect, and without defaulting on debt payments, the portion of the budget available to cut is less than $3 trillion. Musk’s proposal would require cutting about two-thirds from all the other government programs, from running federal prisons to inspecting meatpacking plants, funding veterans’ benefits, and everything else. Few informed people in their right minds think this can be done.

The administrative state will survive, I trust. But it could come to function less on merit, expertise and political neutrality, and more on partisanship, cronyism and favoritism. That’s how it worked in the bad old days of the “spoils system,” before the Pendleton Act of 1883 reformed it. To me, the attack on the administrative state belongs in the same category as attacks on other democratic institutions—the justice system, the free press, public schools and universities. We need to improve them, yes, but also defend them against destruction by autocrats and oligarchs. Here the Democrats have a responsibility to claim the center and defend it against the radical right. Assuming the more radical designs of the Trump campaign and Project 2025 prove unworkable, the administration may have to settle for smaller victories—a few deportations here, a few new tariffs there, and a few federal regulations eliminated. That may be enough to satisfy many Trump supporters, especially when they are spun as great victories.

The party of the working class?

Maybe the most we can hope for is that the most radical members of Trump’s administration are held at bay, prevented from doing too much damage to the federal government’s ability to carry out its democratically legislated missions.

But where does that leave the working class, who would like to see their government do things that actually improve their economic position? Since Trump won 56% of non-college-educated voters, many pundits have suggested that Republicans are now the party of the working class, possibly a crippling blow to Democrats going forward.

To that, I say that Republicans need to earn that designation by delivering solid economic gains to the working class, as Democrats did from the 1930s to the 1960s. While Trump at least talked about struggling working-class families, he did not do much to address their economic concerns with relevant policy proposals. What he did very effectively was scare them with stories of exaggerated social threats like immigrant crime waves. (Immigrants do not commit more crimes; their crimes just get more publicity.) He took advantage of the fact that so many of his supporters are “low-information” voters who have trouble figuring out who’s telling the truth. Researchers have found that the less people follow the news, the more likely they are to support Trump.

Once he is back in office, President Trump will need a positive program to expand working-class opportunity, or his administration may be no more popular than Biden’s. The working class may benefit slightly from a new round of tax cuts, although most of the gains are likely to go to corporate stockholders and other wealthy Americans. But Republicans may try again to offset those tax cuts with cuts to safety-net programs on which working-class and poor families depend, such as subsidized health insurance. Trump and his health-care appointees are no fans of Medicaid or the Affordable Care Act.

I would be very happy if Republicans, despite their track record, would come up with a formula for sustainable, broad-based economic growth. If not, working-class voters will have supported them in vain, and the political center will remain up for grabs.

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Posted by Ed Steffes

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