Trump sets about "starving the beast"

He's unleashing the anti-spending ideologues - at great cost

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Over the past few days, the Trump administration has done something that has never been done in the history of the United States: they’ve ordered a halt to whole categories of federal spending until, as Trump famously said of his Muslim ban, They Can Figure Out What Is Going On.

As a result, organizations around the world are in chaos. Almost all U.S, foreign aid has been paused, shutting down everything from AIDS prevention programs in Uganda to drug interdiction in Colombia. A warehouse fall of weapons destined for Somalian government forces is now apparently lying unguarded in Mogadishu because the State Department can’t pay the guards. Aid organizations I’m familiar with in Europe are unable to pay their subcontractors and scrambling to figure out whether they need to shut down programs altogether. Much of the leadership of the U.S. government’s aid agency, USAID, have been purged after being accused of resisting the order.

A similar directive seems to have shut down whole categories of federal spending at home. The federal government provides funds to states, cities and organizations up and down the country to do everything from developing infrastructure like highways to funding research into new medical treatments. All of that spending appears to have been stopped.

Although right now the administration is only calling these actions a “pause” rather than a long-term cancellation, we ought to be skeptical of that. If a project or investment gets paused for long enough, then it might eventually need to be cancelled. Staff move on, stakeholders become disillusioned, and investment conditions change. Not everything can just be stopped in the middle and then taken up again months later.

Instead, these moves look more like the latest version of the old conservative idea of “starving the beast” - depriving government agencies of money so that they wither and die.

Traditionally, the focus of this strategy has been Congress - conservatives try to persuade legislators to cut taxes and reduce spending so that the government has fewer resources available and has to cancel its programs. But conservative true believers have struggled with this strategy for decades, in part because even most Republican congresspeople do not actually want to reduce the deficit - they want to cut taxes, which is something different.

In fact, we’re so used to hearing American conservatives talk about how they want to reduce the budget deficit that it can be easy to miss the fact that for decades, most of them haven’t really meant it. Since the time of Ronald Reagan, Republican presidents have avoided cutting popular spending programs while sending the deficit soaring through tax cuts - which have added some $10tn to debt levels in recent decades. According to one analysis, if it weren’t for the Bush and Trump tax cuts, U.S. government debt would actually be declining right now rather than soaring to new heights.

Of course, Republicans have still used the deficit as a political cudgel whenever the Democrats are in office. This has created a strange situation in which the fear of being seen as irresponsible spenders forces Democrats to do much more to reduce the deficit than Republicans do. The United States actually had a budget surplus under Bill Clinton in the late 1990s, and Barack Obama kept spending down in the aftermath of the financial crisis to such an extent that it led the economic recovery to be weaker than it might otherwise have been.

But as soon as they’re back in office, Republicans go back to spending, apparently agreeing with Reagan that there’s no need to worry about the budget deficit because it’s big enough to look after itself. Big-spending Republican politicians realize that if they actually listened to committed deficit hawks, then they’d end up cutting popular spending programs and face a democratic backlash - something which, ironically, is exactly what happens to the Democratic presidents who actually make efforts to cut spending.

What we’re seeing right now under Trump is something different - the revenge of the conservative true believers. These are ideologues, not congresspeople, and they’re not worried about democratic consequences. Led by White House budget chief Russell Vought, they want to bypass Congress and smash as much federal spending as possible, as quickly as possible. As a result, we’re about to discover the practical and political limits of “starving the beast”.

This approach already looks like it’s going to do a great deal of damage. Overseas, it creates the impression that the United States is an untrustworthy partner. Many countries would like to have the United States as a friend, trade partner, and aid donor. Keeping them broadly aligned with the West is good news for everybody.

But you know who doesn’t impose sudden trade sanctions as punishment for minor policy disagreements or randomly cancel all spending after having an election? China. And the more that Trump shows the United States to be an inconsistent partner, the more countries across the world will look to Beijing for partnership.

At home, the sheer scale of the spending involved could disrupt the economy. According to the internal government memo which announced the spending pause, something like $3tn of federal spending might be affected. Even in a $30tn economy, that’s still a lot of money - enough to create economic uncertainty and lead organizations to pause investment decisions. When you add to that the uncertainty around the administration’s trade policy, there’s a potential for huge economic harm.

More broadly, Vought and his cronies are calling into question the predictability and rule of law which is central to the smooth functioning of a market economy. Generally, if Congress says money is going to be spent on something, then businesses can be sure that money is actually going to get spent and can plan accordingly. But a world in which the White House can just randomly cancel $3tn worth of programs is one in which a stable investment environment does not exist. Enormous business and political pressure is going to be brought to bear on the White House to fix that situation, and I doubt Vought will be able to avoid it for long.

There’s also a legal question. The White House can’t just cancel congressionally-mandated spending, and it can only pause it with good reason - which doesn’t appear to have been provided here. That means that a lot of this spending is likely to get bogged down in court cases, increasing the atmosphere of uncertainty and potentially leading to Supreme Court rulings that strengthen the power of the presidency further.

How far Trump might let this damage go is unclear. It’s just another area in which he seems to have adopted the Silicon Valley ethos of “moving fast and breaking things”, and he’ll eventually break so many things that the political backlash becomes too painful to ignore. Hopefully by the time he reaches that point, he won’t have plunged the America into a disaster from which it is impossible to escape.

Thanks for reading America Explained. This post is free. If you haven’t already, please consider upgrading to a paid subscription, which allows you to read every post and access the full archive. It also enables me to put more time and energy into this newsletter, something that I’m hoping to do in order to cover the new administration more thoroughly. If you’re already a paid subscriber, thanks for supporting independent media and making it possible to do what I do.