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Second-rate columnist and former prize-winning economist Paul Krugman has assured us that the key to economic growth was deficit spending, a policy with no real downside. That has not worked very well. But what if President Trump and the GOP Congress do manage to effect serious cuts? Is the inverse of Krugmanomics true--that sudden large reductions in spending harm growth, at least in the short term?
The House DOGE Subcommittee estimates that there was $2.7 trillion in fraudulent expenditures in recent years including $170 billion to ineligible, deceased and non-existent persons. But could the GOP suffer electoral blowback for cutting off that flow because ineligible, deceased and non-existent persons may well comprise a critical voting bloc in a number of states, particularly in urban jurisdictions?
Seriously though, is there a risk of initial adverse economic outcomes from ending massive amounts of fraud and waste? A majority (as much as 70%) of jobs actually created (i.e., number left over after the invariant unreported downward “adjustments” two weeks after the upbeat lie presented to the public each month) during the Biden Administration were the result of government hiring or spending. So would employment take a measurable hit if big cuts are made?
I live and work in the DC metro area. The fear and rage is palpable. Not just federal employees, but contractors who actually perform, vendors and the wider business community are also worried. The rest of the country is unlikely to be sympathetic about adverse outcomes in the country’s wealthiest metro area (the five wealthiest counties in the USA as measured by per capita income are all DC suburbs). But what if the immediate effects of the cuts are more broadly felt than expected?
Trump was elected in large part because the Democrats’ handling of the economy was appallingly bad. But what if there is a short-term economic hit from spending cuts? Will that create a political outcome that will derail the Trump agenda and give Congress to the Dems in 2026? And allow the odious Krugman to claim that overspending (even including utterly fraudulent spending) was wonderful after all?
Conservatives believe, with considerable justification, that reductions in tax and regulatory burdens foster economic growth, but how fast does that happen? Fast enough to offset the repercussions of the sudden disappearance of a trillion dollars in federal outlays? Is somebody modeling this for the GOP right now? I want those cuts to happen, but not if the way we do it winds up cementing socialist rule for the foreseeable future.
I look forward to economically literate comments that will assuage my fears on this point.
Discussion (56)
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I think the issue is, we need constant, almost indiscriminate debt growth all of the time. It doesn't matter if it's from the private sector or the government sector, but you have to have it.
Krugman is an inflationist. All of those ruling class "experts" are inflationists. Inflationism going to quit working the hard way in the not too distant future.
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Even assuming there is some immediate/short-term "impact" from these measures, that's why it needs to be done NOW so that things can be well on the way towards a new normal, before the mid-terms.
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Congress, as we know it, is a group of criminals whose sole occupation is securing their repeated re-election by bribing their electorates with Government cash. If enhancing the wellbeing of America appears at all on any one of their to-do lists I can assure you it is down at the bottom of said list. To the extent that the Government trough dries up, I'd imagine there will be wailing and gnashing of teeth. The question is ... among which groups? I'd think that if you were the beneficiary of Government largesse you were already opposed to Trump.
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But those in Congress may have assumed they were immune, and then suddenly found they weren't.
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The issue is not just people who know they depend on government but small business and service providers whose customers depend on government employment. Think of the impact of closing a military base or moving a large federal facility.
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