Trump says he will make America great again, but if he cuts $2 trillion from the US Federal budget of $6.7 trillion – as he says he wants to do – then the impact on millions of US people will be catastrophic. The reality is that he seems to be setting out to Make America Poor Again.
This is the audio version:
This is the transcript:
Trump says he's Making America Great Again, and I hate to argue with him, but I think he's Making America Poor Again. Let me explain why.
The US federal budget is $6.7 trillion a year, which is a staggering amount of money. And Elon Musk, acting on behalf of Trump, in the new department that is supposedly being created for him to manage, is saying that he wants to take $2 trillion out of that budget.
$2 trillion out of $6.7 trillion is near enough 30 per cent of the total US government spend for the States as a whole. So, is that possible? It's a question that I posed to myself, and I went off to look at the data on what the US government actually spends, which is very conveniently available on a US federal government website.
This is the chart that they publish of their expenditure. Just take a look at this. Of the total US federal government expenditure 18 per cent is on defence, and Trump says he wants to increase defence spending.
14 per cent is on interest payments, and there's no way he's going to cut those out.
21 per cent is on social security, and according to Trump that figure is not in jeopardy as a consequence of his election.
And 5 per cent is on veterans' benefits. And there's no way he's going to upset veterans if he's got any sense in the USA.
Add all those together and that comes to 58 per cent of the total spending by the US federal government. Add in, in fact, the income security payments, which are an extension of social security, and a total of 66 per cent looks as though it might well be protected from US government cuts.
What does that mean? There's only 34 per cent left to be cut out. And according to Elon Musk, he wants to cut the total spend by 30 per cent. So what is he going to have to cut? Medicare, which comes to 15 per cent of total US federal government expenditure, and all the expenditure on education, transportation, and agriculture.
What else is he going to find? I don't know. He's going to have to rummage around to find little bits elsewhere.
Is the USA going to put up with healthcare spending by the US government on Medicare being cut altogether, which would mean most pensioners would be left without any form of federal support for their healthcare? I doubt it very much; let's be totally honest. This doesn't seem politically plausible in any way. The fightback would be enormous.
Is it plausible that the entire federal education program could end? Well, it's plausible, but I think it's going to be challenged heavily because this is the programme that makes sure that those who are in the poorest parts of the USA get the support they need for some education when wealthy areas already get all the education that they desire.
And when it comes to transportation and agriculture, these things are core to the American economy and that transport budget is spent very largely on infrastructure, supporting states to actually make sure that things like national highways are vaguely maintained. And if you've been in the States, you'll know how poorly maintained many of them look to be.
So, where is Musk going to find his cuts? It's a very good question and I haven't got an answer. But what I do know is that if he cuts the areas of spending, which he could do without Trump breaching his election promises, then America is going to be extremely badly off as a consequence.
Large numbers of people who are already in pretty marginal economic situations, like a great many American pensioners, are going to be very much worse off indeed, particularly with regard to health care, and education and so on is going to be cut so badly that frankly he's going to seriously harm the prospects of any form of economic equality inside the USA, which again is going to play badly in the polls.
So, is it plausible that Trump could cut two trillion out of the federal government budget, which is what he would like to do, and which Musk says he'll achieve? No, I don't think it's plausible at all. But even if he tries, my point is that he's going to Make America Poorer Again. And why is that? Well, let's be honest. That's because every time the US federal government spends a dollar it is a new dollar that flows into the economy. It isn't tax revenue raised, because that isn't the way in which it works in the US. In the US, all government expenditure is funded by new dollars created by the Fed on behalf of the US government.
So, every time the US federal government spends, a new dollar flows into the economy, keeping the economy going, keeping growth high, providing the funds to make sure that people have sufficient to spend on the things they need.
If you cut those dollars out of the system, the growth of the US economy will decline.
Employment in the US economy will decline.
The number of jobs available in the US economy will fall.
The rate of wage inflation in the US economy will decline, and it's already pretty bad, with most people in the middle and working classes having not seen real wage rises for decades.
So, this programme by Musk to cut $2 trillion out of the US federal government's expenditure budget is going to simply be a programme to take $2 trillion out of the US economy. And by doing so, he's going to leave it worse off. And the hit is going to be on the poorest in America.
Hence my suggestion. Trump is not going to Make America Great Again. Trump is going to Make America Poor Again. And that is not going to make many people happy.
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I wonder how many Trump voters knew that it was their backs that Trump would be riding to MAGA?
U.S.A
United
Suckers of
America.
A travesty…………………..
Trump voters, or as I call them, ‘the stupids’. Maybe a small percentage of them , presumably the very wealthy billionaire backers, will benefit and knew what they were doing.
As for the rest…..ignorant, deranged and deluded fools. United Suckers of America indeed.
Apparently Einstein said that the difference between genius and stupidity is that genius has it’s limits.
Great video. Your 4th in about 8 days about Donald J Trump.
Trump is news right now
Why are you surprised I might make videos about him?
I’m puzzled that you are puzzled.
Of course he will make MAPA, that is the whole point. Trump is P.T.Barnum made president & his attitude is “a sucker born every minute” as his time in business shows (a long list of unpaid creditors etc etc). He despises “little people” and cares not one whit that their lives will be wrecked. This is, mostly ego, a man-baby with a very weak one throwing his toys out of the pram. US (ex?) citizens voted for him. Now they can enjoy the consequences.
If UK politicos have half an ounce of sense (they don’t) , they would pull up the drawbridge (they won’t).
Thought for the day:
Each time humans think a development of some sort makes them more free – I offer the internet – there were others (ammonia – Haber-Bosch process – food) – the underlying power system – after a period of adjustment finds a way to use the new development to bind humans more tightly. We also make the error of not recognising how underlying power systems evolve and adapt. – the election fo Trump is an example of how underlying power systems have taken the Internet and adpated it to tell people what to think & how to vote.
Without disagreeing at all with your analysis, I note you don’t mention military expenditure. Perhaps this because it is unlikely to fall in overall terms? But I wonder if America’s funding of NATO might be one likely area for reduction in expenditure, which would be of interest to your European readers?
According to Reuters, “Washington allotted $816.7 billion for defence spending in 2023, according to the Pentagon. In the same year, NATO’s budget was 3.3 billion euros ($3.59 billion), according to its website. The U.S. contributed 15.8% of the NATO tab, which is around 521 million euros ($567 million).” (https://www.reuters.com/fact-check/us-contributes-16-nato-annual-budget-not-two-thirds-2024-05-31/)
This might be costly for Ukraine, but according to Jeffrey Sachs (in various articles and videos over the last couple of years), John Mearsheimer (also criticising what they all the “Deep State” in America) Ukraine is in a war because of America’s “NATO” ambition on the boarders of Russia.
Trump says he will increase it
“Ukraine is in a war because of America’s “NATO” ambition on the boarders of Russia.” A convenient narrative. What follows is slightly off topic but I suggest relevant.
Following the events in early 2014 (I have first hand accounts from people on Maidan square at that time) Putin saw that Ukraine was becoming a threat to his Russian regime – not because of NATO but because Ukrainian people chucked out a placeman. The same people had lots of relatives in Russia – to whom they talked on a regular basis (Russian being their common language). Thus the problem was one of contagion – one group contaminating another group with political ideas/actions.
Overtime, Russian narratives have evolved from NATO/get rid of Ukrainian fascists (which is still used) through to “we want the bits of Russia that we lost in 1991 – back”, which is an additional recent narrative – needed to justify the “800,000 dead and wounded by Christmas” problem (plus the growing inflation problem). America did not initiate Maidan, had no influence over it or indeed, the election of Zelensky (you can be sure that Trump was not happy that Zelensky was elected).
spot on Mike.
It is disappointing so many accept the Russian propaganda without checking or, at least, viewing the other narratives.
Often I see they also point out the downsides of American and Western foreign policy which are true in many ways. But others do bad things as well (with less internal discussion allowed than in the West ) and this is a separate case.
You may be confused about what NATO spending is.
NATO is an alliance of states all of which have their own defence budgets and contribute forces to the common cause.
There are bodies to co-ordinate those activities. At only 3 billion, the ‘NATO spending’ you refer to is for Headquarters and co-ordination. Programs which are jointly funded.
European countries provide forces to be deployed in Europe with a small capability for out of Europe deployments e.g. British and French aircraft carriers and amphibious forces. The US has no enemies on their doorstep and two huge oceans either side. Most of their forces are for foreign deployment. They have forces large enough for two fronts. They commit a number of troops to Europe and also station forces in the Far East.
They have a ‘triad’ of nuclear forces-submarine launched missiles, ground based missiles and nuclear weapons carried by aircraft and are developing new bombers. The UK and France have one minimal system.
The US spends more in total than the other members put together but for example, soldiers are paid more in the US than in Poland. So it is not a direct comparison.
The dollar is a reserve currency which benefits the US.
The US can afford large scale development programs and buys enough units of aircraft, missiles etc to bring down the unit cost in a way not possible in Europe, unless we have joint production. We do to an extent-eg the eurofighter but not overall.
Because of this, it is often better value for money for European countries to buy American -which helps to fund the US effort. But that works when we are co-operating. For Europe to develop and deploy enough forces of sufficient quality would take at least a decade.
I am suspicious of Jeffrey Sachs opinions. I find them too one sided. Mearsheimer IMHO seems not to understand Europe. Russia’s borders are quite safe from military threat. Why else is NATO scrabbling around to build up forces? Putin’s Russia is not safe from alternative economic and political values. In both Ukraine and Belarus (and all the former Warsaw Pact states and the former Soviet republics in the Baltic) the majority opinion is to be closer to Europe. That is the main cause of the ‘special military operation’.
Time to get the popcorn ready
Next four years are going to be interesting times in USA.
I just feel very sorry for the poor the very young and the elderly they are going to take one he’ll of a hit.
Not to mention that, when you factor in the amount of money the Fed needs to create in order properly to mitigate the effects of climate change, and to prevent climate disaster . . . who, if anyone, will end up happy?
Rolling back climate mitigation will prove to be the most damaging effect of the Trump presidency. It could very well make the climate unsuitable for human life.
Will the rest of the world stand by and allow that to happen? Sadly, I think it will. Pray to whatever gods you believe in for sanity to prevail.
Fully agree with first paragraph; will do what I can to make sanity prevail, but I agree: that can’t be taken for granted.
Would love to know how much the US government will need to spend, at a minimum, to meet its Paris agreement obligations. Any reliable estimates out there, contributors?
Only if I use Google. It’s free….
While it doesn’t sound plausible, I suspect they are crazy enough to try to do that very thing, along with their other equally crazy policies.
May I cheer up everyone here with this piece of news (also following on from the deeply impenetrable cryptocurrency thread here, that reminded us that users of new technology in history always – always – lead the thinkers, who explain it):
“Now, as traders bet that Trump will follow through with an outlandish plan to create a bitcoin strategic reserve and wipe out the U.S.’s $35 trillion debt with bitcoin, Elon Musk has backed Cantor Fitzgerald chief executive and bitcoin price bull Howard Lutnick for Trump’s Treasury secretary.” (Forbes, 16th November, 2024)
Madness….
No, just the deconstruction of the sovereign State. They will not figure out the consequences: ever, or at least until they are engulfed by them; too late, or not.
It seems irony is beyond everyone. I am beginning to believe that readers, even here prefer to read what they want to see, rather than anything more uncomfortable or candid. There is nothing comfortable about a) what is coming our way; and nothing comfortable about either what we have done to ourselves, or what we have done to ourselves for decades (for which my generation must take responsibility for the last n-years, but frankly refuses to recognise or take any responsibility).
Trump is now proposing that Lutnick serve as his Commerce Secretary instead: https://abcnews.go.com/Politics/live-updates/trump-transition-live-updates-house-ethics-committee-meet/?id=115967345&entryId=116018845
All this could be compounded by implementing the proposed tariff policies, particularly on China. A substantial amount of consumer goods are produced in China and I can’t imagine that Wallmart will absorb the cost and I don’t expect Apple will be too pleased either.
The tech export ban to China is ruining Intel who are currently in trouble and losing money and are implementing a $10 billion cost reduction plan.
Furthermore, China isn’t going to take it lying down. It could stop exporting Gallium (98% global production) and Germanium (93% Global Production) to the US which would decimate its high tech production such as space technology etc. It dominates Lithium processing and Cobalt processing require for batteries.
The BRICs aligned countries could agree to isolate all trade ties to the US and stop trading in the dollar with disastrous consequences for the US. Private debt levels are rocketing again and Trump’s plans could tip the country into economic collapse never mind recession.
They have destroyed the industrial base through financialisation of the economy to a rentier model and if the country is isolated they do not have the resources to rebuild the industrial base they exported to Eastern Asia.
I believe that the US had a hundred years of wage growth, if you were white, from the 1870’s to the 1970’s even through the depression. Since the mid 1970’s and the rise of neoliberalism wages have stagnated along with rising wealth inequality as seen here in the UK.
So yet another colonial power may be coming to an end and I doubt that Xi, Putin, Modi and Lulu da Silva will shed many tears.
“May you live in interesting times” to quote the Confucian curse!
Thanks
Minor typo spotted in the transcript of a very interesting video:
“So, is it plausible that Trump could cut two billion out of the federal government budget…”
Regards
Thanks
Adam Tooze has a stunning chart in his latest Chartbook post (subscribers only) https://adamtooze.substack.com/p/top-links-564-who-actually-works.
“Only 2 percent of the US workforce works for the federal government. If you fired half of them as Musk has suggested that would hit roughly 70% working in military- or security-related agencies.”
The vast bulk of US govt expenditure is military/security. Only a tiny portion goes to education etc.
Not sure if this will work but this should be the link to the chart.
https://x.com/adam_tooze/status/1858485304950432196/photo/1
I never thought I would reflect on the modern relevance of Caligula’s appointments to office, which now even appear reasonable; he only appointed one horse* to a senior post……..
It seems that when Trump said he was going to ‘drain the swamp’ this is what he meant, and how he intends to do it; by reducing the Federal State to a desert. So far, I do not see signs that this is not what the voters think they voted for; which is not encouraging for the rest of us, and the rest of the world. This is not an uplifting ‘Mr Smith goes to Washington’: this is Scipio Africanus visiting Carthage.
*I should acknowledge Edward Luce in the FT (on Trump’s appointments), as a reminder of how apposite Caligula’s appointment procedure is to this unfolding filleting of Washington.