May 11 JDN 2460807

I didn’t really intend for my blog this year to be taken over by talk about Trump. But all the damage that Trump is doing to America and the world is clearly the most important thing going on in economics right now, and it’s honestly just hard for me to think about anything else.

Trump has proposed a budget. (Read at your own risk; what’s on the White House website is more screed than budget proposal. And it’s pretty clearly written by Trump himself, perhaps with some editing.)

It will come as no surprise to all of you that it is a terrible budget, even worse than what the Republicans recently passed.

First of all, Trump is cutting discretionary spending by $163 billion. This is a huge cut—it removes almost one-fourth of all non-military discretionary spending. Trump naturally claims that he’s just reducing waste, shutting down DEI programs (for the right wing this is considered a good thing), what Trump calls “Green New Scam funding” (read: anything remotely related to environmental sustainability or climate change), and what Trump claims are “large swaths of the Federal Government weaponized against the American people” (read: any other departments Trump doesn’t like, whether or not he actually understands what they are for).

And lest you think that these draconian cuts are being done for fiscal responsibility in the face of an utterly massive federal deficit, Trump also proposes to increase military spending by 13%; multiplying that by our current $850 billion budget means he’s adding $110 billion to the military; and he also says he wants to add a further $119 billion in the mandatory budget. This means he’s cutting $163 billion from non-military spending and adding $239 billion in military spending—which will actually increase the deficit.

Trump is ending programs like the Cybersecurity and Infrastructure Security Agency (sure, let’s just let Chinese hackers in! Why not? It’s not like there’s anything important on those Pentagon servers!) and Fair Housing (amid a historic housing crisis), as well as slashing the EPA (because who needs clean air and water anyway?).

Unsurprisingly, he’s also ending anything that resembles DEI, which includes both some really good necessary programs, and also some stuff that is genuinely ineffective or even counterproductive. Most people who work at firms that have DEI programs think that the programs do more good than harm, but there are big partisan differences, so cutting DEI will play well with the Republican base. But I for one do not want to play the word game where we say out loud every time “diversity, equity, and inclusion”, because there is a big difference between the fundamentally laudable goals of diversity, equity and inclusion, and the actual quite mixed results from DEI programs as they have been implemented. It’s awful that Trump is cutting DEI with a chainsaw, but we really should have been cutting it with a scalpel for awhile now.

Trump is also throwing money at the border, increasing the budgets of CBP (whatever) and ICE (very, very bad!). This is probably the worst thing about the budget, though it also isn’t a big surprise. Part of the increased ICE spending is “50,000 detention beds”, which since ICE lately has been arresting and detaining people without warrants or trials and courts have specifically ruled that they are violating due process, I believe we can fairly say constitutes a concentration camp. If and when they start actually giving everyone—everyone, dammit—due process, then you can call it a detention center.

Trump is eliminating USAID and folding what’s left of it into DFC; but these institutions had quite different goals. USAID had two goals: Advance America’s interests, and make the world a better place. And while it did have significant flaws, overall it did quite a good job of achieving both of those goals—and indeed, publicly making the world a better place can advance America’s interests. DFC’s goal is to promote economic development by financing investments that otherwise could not be financed. That can also promote America’s interests and make the world a better place, but it excludes many of the vital roles that USAID has played in providing humanitarian aid and disaster relief as well as promoting democracy and advancing environmental sustainability. (And when I say “promoting democracy”, I don’t mean the way the CIA does it, by orchestrating coups; I mean things like helping Ukraine remove its dependency on Russia.) There is more to life than money—but I don’t think Trump really understands that.

Trump is canceling a bunch of subsidies to renewable energy, but honestly I’m not too worried about that; the technology has matured so much that renewable energy is actually the cheapest form of energy for most purposes. (And it kinda makes sense: The sun and wind are already there.) Removing the subsidies will make it harder to compete with oil (because oil is still heavily subsidized); but I still think renewables can win. Basically the past subsidies have done their job, and it’s probably okay to remove them.

There’s a really weird proposal involving food, which I think I will just quote in its entirety:

The Budget also supports the creation of MAHA food boxes, that would be filled with commodities sourced from domestic farmers and given directly to American households.

This sounds… kinda… Maoist? Definitely some kind of communist. Why are we circumventing the highly-functional capitalist market for food with massive in-kind transfers? (Despite scaremongering, groceries in the US are still pretty affordable by world standards.) And how are we going to do that, logistically? (Produce does need to be kept fresh, after all.) Does Trump think that markets have trouble providing food in this country? Does he not understand that SNAP exists, and already prioritizes healthier food?(Or does he plan to get rid of it?) Does he think that the reason most Americans don’t eat a very good diet (which is objectively true) is that they aren’t able to get fresh produce? (And not, say, subsidies for factory-farmed meat and high-fructose corn syrup, or mass marketing campaigns by corporations that make junk food?) I’m not so much against this program as I am really baffled by it. It seems like it’s trying to solve the wrong problem by the wrong means. (I’m guessing RFK Jr. had a hand in this, and I recently learned that he doesn’t believe in germ theory. He is a god-tier crank. Like, his views on vaccines and autism were bad enough, but this? Seriously, you put this guy in charge of public health!?)

There are some things in the budget that aren’t terrible, but they’re mostly pretty small.

One actually good thing about Trump’s new budget is the expansion of VA services. I don’t really have any objection to that. It’s a fairly small portion of the budget, and veterans deserve better than they’ve been getting.

Trump says he won’t be cutting Social Security (so perhaps we dodged a bullet on that one). Of course, if he actually cared in the least about the budget deficit, that’s probably what he would cut, because it’s such a huge proportion of our spending—about one-fifth of all federal spending.

I’m not sure what to think about the changes Trump is making to education funding. He’s shutting down the Department of Education, but it seems like most of what it does (including offering grants and handling student loans) is just going to be folded into other agencies. It doesn’t actually seem like there have been substantial cuts in their services, just… a weird and unnecessary reorganization. My guess is that after Trump had already publicly committed to “end the Department of Education”, some staffer quietly explained to him what the Department of Education actually does and why it is necessary; since he’d already committed to shutting it down, he didn’t want to pivot on that, so instead he shut it down in name only while preserving most of what it actually does in other agencies.

Trump is also investing heavily in charter schools, which… meh. Some charter schools are really good, some are really bad. There isn’t a clear pattern of them being better or worse than public schools. Overall, the preponderance of evidence suggests that the average charter school is worse than the average public school, but there’s a lot of variation in both, so the odds that any particular charter school is better than any particular public school are still quite high. (I recently learned about this measure of effect size, probability of superiority, and it’s now my new favorite measure of effect size. Eat your heart out, Cohen’s d!)

Trump is also diverting funding to apprenticeships; he’s introducing a new “Make America Skilled Again” (ugh) grant that States would be required to spend at least 10% on apprenticeship. I’m pretty okay with this in general. 10% is not a lot, and we totally could use more apprenticeship programs in fields like welding and pipefitting.

Another good thing Trump is doing is increasing funding for NASA; he’s clearly doing it out of a sense of national pride and hatred of China, but hey, at least he’s doing it. We might actually be able to pull off a human Mars mission (several years from now, mind you!) if this higher funding continues.

Trump is also redirecting DEA spending to Mexico, Central America, South America, and China; since most fentanyl in the US is made in Latin America from Chinese ingredients, this actually makes sense. I still don’t think that criminalization is the best solution to drug abuse, but fentanyl is genuinely very dangerous stuff, so we should definitely be doing something to reduce its usage.

Finally, and somewhat anticlimactically, Trump is creating some kind of new federal fire service that’s supposedly going to improve our response to wildfires. Given that we already have FEMA, a significant improvement seems unlikely. But hey, it’s worth a try!

These small good things should not distract us from the massive damage that this budget would cause if implemented.

It was not necessary to shift $160 billion from non-military to military spending in order to increase funding for NASA and the VA. It was not necessary to cut hundreds of programs and eliminate USAID—the agency which did what may literally be the very best things our government has ever done. DEI programs had their flaws, but it was wrong to eliminate all of them, instead of finding out which ones are effective and which ones are not.

And while it’s a tiny portion of the budget, the cuts to the EPA will kill people. Most likely thousands of Americans will die from the increased air and water pollution. It will be hard to pinpoint exactly who: Would that kid with asthma have died anyway if the air were cleaner? Was that fatal infection from polluted water, or something else? But the statistics will tell us that there were thousands of unnecessary deaths. (Unless of course Trump falsifies the statistics—which he very well might, since he routinely calls our world-class economic data “fake” when it makes him look bad.)

The large federal budget deficit will be in no way reduced by this budget; in fact it will be slightly increased. If we were in a recession, I’d be okay with this kind of deficit; it was actually a good thing that we ran a huge deficit in 2020. But we aren’t yet—and when one does inevitably hit (given the tariffs, I think sooner rather than later), we won’t have the slack in our budget to do the necessary Keynesian stimulus.

I don’t see any mention of what’s going to happen to Medicare and Medicaid; given that these two programs together constitute roughly one fourth of the federal budget—and nearly twice the military budget—this is a very conspicuous absence. It’s possible that Trump’s leaving them alone because he knows how popular they are, but this once again reveals the emptiness of Republican deficit hawkishness: If you really wanted to reduce the deficit by cutting spending, you’d do it by cutting the military, Social Security, Medicare, and Medicaid. Those four things together comprise the majority of the federal budget. Yet it seems that Trump’s budget cuts none of them.

Mind you, I don’t actually want to cut Social Security, Medicare, or Medicaid; so I’m relieved that Trump isn’t doing that. I’m pretty okay with cutting the military, but I’ll admit I’m less enthused about that since the start of the Ukraine War (I think some moderate cuts are still in order, but we should still have a very big military budget to protect ourselves and our allies). But these are the only budget cuts that could realistically reduce the deficit.

What I actually want to happen is higher taxes on rich people. That’s how I want the budget to be balanced. And Trump very obviously will not do that. Indeed he’s almost certainly going to cut them, making our deficit even larger.

So we’re building a concentration camp, the Chinese are going to hack the Pentagon, we’re going to buy more tanks we don’t need, we won’t be able to properly respond to the next recession, and thousands of people will die from air and water pollution. But at least we got more NASA funding!