When job cuts improve the economy

The Washington Post reports:

President Trump’s budget proposal this week would shake the federal government to its core if enacted, culling back numerous programs and expediting a historic contraction of the federal workforce.

This would be the first time the government has executed cuts of this magnitude — and all at once — since the drawdown following World War II, economists and budget analysts said.

The spending budget Trump is set to release Thursday will offer the clearest snapshot of his vision for the size and role of government. Aides say that the president sees a new Washington emerging from the budget process, one that prioritizes the military and homeland security while slashing many other areas, including housing, foreign assistance, environmental programs, public broadcasting and research. Simply put, government would be smaller and less involved in regulating life in America, with private companies and states playing a much bigger role.
The cuts Trump plans to propose this week are also expected to lead to layoffs among federal workers, changes that would be felt sharply in the Washington area. According to an economic analysis by Mark Zandi, chief economist for Moody’s Analytics, the reductions outlined so far by Trump’s advisers would reduce employment in the region by 1.8 percent and personal income by 3.5 percent, and lower home prices by 1.9 percent.

“These are not the kind of cuts that you can accommodate by tightening the belt one notch, by shaving a little bit off of a program, or by downsizing a few staff here or there,” said Robert Reischauer, a former director of the Congressional Budget Office. “These are cuts that would require a wholesale triage of a vast array of federal activities.”

Still, budget experts said it was unclear what the precise impact on many agencies might be because the departments could choose to implement reductions in a variety of ways.

Administration officials have also stressed that discussions are ongoing between budget officials and agencies, and that the size of the budget cuts remains fluid. Moreover, the cuts cannot take effect unless they are authorized by Congress, which could prove difficult. Lawmakers routinely rebuffed budget requests from President Barack Obama, leading instead to protracted negotiations between both sides. …

“Unfortunately, we have no alternative but to reinvest in our military and make ourselves a military power once again,” National Economic Council Director Gary Cohn said on “Fox News Sunday.”

“If you’re doing that in an area where you have to balance the budget and you cannot create a further deficit, you have to make cuts. It’s no different than every other family in America that has to make the tough decisions when they need to spend money somewhere, they have to cut it from somewhere else.”

The federal government is projected to spend $4.091 trillion next year, with roughly two-thirds of that going mostly toward Social Security, Medicare, Medicaid, poverty assistance and interest payments on the government debt. This spending is expected to be left untouched in the budget proposal next week.

What Trump will propose changing is the rest of the budget, known as discretionary spending, which is authorized each year by Congress. Slightly more than half of this remaining money goes to the military, and the rest is spread across agencies that operate things like education, diplomacy, housing, transportation and law enforcement.

Among Trump’s expected proposals are an increase in military spending of $54 billion, more money to start building a wall along the border between the United States and Mexico, and the creation of new initiatives that expand access to charter schools and other educational programs.

To offset that new money, Trump will propose steep cuts across numerous other agencies. Although final numbers remain in flux, his advisers have considered cutting the Department of Housing and Urban Development’s budget by $6 billion, or 14 percent, according to a preliminary budget document obtained by The Washington Post. That is a change that Trulia chief economist Ralph McLaughlin said could “put nearly 8 million Americans in both inner-city and suburban communities at risk of losing their public housing and nearly 4 million at risk of losing their rental subsidy.”

Preliminary budget documents have also shown that Trump advisers have also looked at cutting the Environmental Protection Agency’s staff by about 20 percent and tightening the Commerce Department’s budget by about 18 percent, which would impact climate change research and weather satellite programs, among other things.

Trump and his advisers have said that they believe the federal workforce is too big, and that the federal government spends — and wastes — too much money. They have said that Washington — the federal workers and contractors, among others — has benefited from government largesse while many other Americans have suffered. Federal spending, they have argued, crowds the private sector and piles regulations and bureaucracy onto companies.

Trump’s chief strategist, Stephen K. Bannon, has said Trump will lead a “deconstruction of the administrative state.” On Friday, White House press secretary Sean Spicer said Obama loyalists had “burrowed into government.” Last month, Trump said the government would have to “do more with less.”

Trump’s proposal comes at a time when the federal budget is facing massive structural shifts in society and the economy. Aging baby boomers are swelling the number of Americans collecting Social Security and Medicare benefits, and the costs of these programs will continue to grow faster for more than a decade, budget experts said. In addition, the expected rise in borrowing rates and the growing national debt are expected to push interest payments on the debt from $270 billion this year to $768 billion in 2027, outpacing any growth in tax revenue.

The spending cuts Trump will propose Thursday will not impact any of these spending trajectories, though many conservatives have urged him to tackle these parts of the budget more comprehensively.

“It is his vision for the administration of the government,” said Doug Holtz-Eakin, another former CBO director. “But the big government that everyone decries,” he said, is in other programs that Trump is not proposing yet to cut.”

A lot of attention was paid last weekend to not a job cut, but the firing of U.S. Attorney Prett Bharara, James Freeman reports:

Manhattan’s former federal prosecutor, a movie buff whose job allowed him to become a fixture at Hollywood Oscar parties, has seized the opportunity to star in his own drama. Mr. Bharara declined to offer the customary resignation along with dozens of other U.S. attorneys when asked to do so by new Attorney General Jeff Sessions.

Before getting fired last week but perhaps aware that he would be asked to resign, Mr. Bharara declined to take a call from the President of the United States. According to the Journal, Mr. Bharara told a Justice official that he thought the call was inappropriate given his jurisdiction over important matters. But this concern did not keep Mr. Bharara from visiting Trump Tower last year to meet with the President-elect when it appeared that the prosecutor might be able to keep his job. A former aide to New York Democrat Sen. Chuck Schumer, Mr. Bharara has probably earned at least another year of Hollywood invitations with his made-for-media departure.

This weekend’s entertaining drama aside, life will go on and big cases will proceed in the Southern District of New York. Mr. Bharara’s deputy Joon Kim is steeped in the corruption cases the office is pursuing. And any eventual Trump appointee will be unlikely to call off ongoing inquiries into associates of Democratic politicians like Gov. Andrew Cuomo and New York City Mayor Bill de Blasio.

In the Trump era, routine events like the replacement of the previous president’s appointees with a new administration are treated as Nixonian power grabs on cable outlets like MSNBC. But it’s not just the media fringe raising warnings about President Trump’s personnel management.

For observers across the philosophical spectrum, it’s not the people Mr. Trump is firing that represent the biggest problem. It’s the people he’s not hiring. “From the moment he was sworn in, President Trump faced a personnel crisis, starting virtually from scratch in lining up senior leaders for his administration. Seven weeks into the job, he is still hobbled by the slow start,” reports the New York Times . “Many federal agencies and offices are in states of suspended animation, their career civil servants answering to temporary bosses whose influence and staying power are unclear, and who are sometimes awaiting policy direction from appointees whose arrival may be weeks or months away.”

Federal agencies in suspended animation doesn’t sound like unconditionally bad news to many taxpayers. But John Fund at National Review sees “a personnel crisis in the Trump White House” that allows Obama holdovers to continue to influence policy across the federal bureaucracy. “At the current rate of nominating individuals to positions, we could see the Trump administration’s first or even second anniversary before it would actually be filled with Trump people,” writes Mr. Fund.

But there just aren’t that many Trump people, which is what many voters found so appealing about him. The good news is that Mr. Trump didn’t show up with a standing army of thousands of political hacks ready to return a generation’s worth of Beltway favors. The bad news is that he didn’t show up with thousands of people ready to staff the government. And even if he can find them now, he doesn’t necessarily want them.

“A lot of those jobs, I don’t want to appoint, because they’re unnecessary to have,” Mr. Trump told Fox News last month. “You know, we have so many people in government, even me. I look at some of the jobs and it’s people over people over people. I say, ‘What do all these people do?’ You don’t need all those jobs.”

Certainly dedicated staff can have a big impact in Washington. But even during the Reagan years conservatives shook their heads watching zealous reformers come to Washington only to begin seeking bigger offices and bigger budgets for their agencies, rather than trying to shut them down. Suspended animation has its virtues.

Mr. Trump spent last year demonstrating how few people and how little money are required to mount a winning presidential campaign. Will he now prove how many federal employees aren’t needed to run a government?

So it would seem. Too bad Wisconsin Republicans didn’t precede Trump in actually cutting government. The size of government — including spending and taxes — is literally twice what is justified from growth in inflation and the Consumer Price Index since the late 1970s. That’s because there is no constitutional limits on growth in spending and taxation, thanks to Republicans’ collective decision that the size of state and local government is just fine as long as they’re in charge of it.


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