From Luke Gromen....If incoming Trump officials promise to cut spending before devaluing US debt/GDP down to 70-80% of GDP or otherwise significantly weakening the USD, or heaven forbid actually start cutting spending, investors should buy USD and sell everything else, a la 2022 and 3q23.
If Trump, Musk, Vivek, Bessent etc. make the mistake of starting to cut spending BEFORE devaluing US debt/GDP, the US will suffer an economic and debt crisis of GDP down, stocks down, rates up, USD up, a la 2022 on steroids, and politically they would be risking setting the table for Democrats to sweep back into Congress in 2026, rendering Trump a lame duck in 2026, and kneecapping Vance’s 2028 presumed presidential odds.
That is the game the Democrats were playing with Harris/Walz - the long game. I don't believe they fully anticipated the congressional losses, but they've shown they are in it to win it for the long run.
How are theTrump admin going to lower the deficit while cutting taxes and promising to "spend big? BTW do you think they will cut subsidies on Teslas?😂
This all coming from the man who, despite his second paragraph, oversaw under Reagan the beginning of a 45 year trend of increased debt to GDP. I was there. Tax cuts will pay for themselves they said. They didn't. His facile essay here reminds me of the fable "Belling the Cat".
These amounts of spending cuts are not unprecedented. President Harding took office during the Depression of 1920, which was the blow-off of the WW1 bubble. He was the first president to even have a budget. He reduced spending from $6.3 Billion in 1920 to $3.3 Billion in 1922, a 47% decrease. The national debt was also reduced by 33%. This caused the Depression of 1920 to end in 18 months, and by many metrics, it was a sharper decline than the Great Depression. Not to be outdone, President Coolidge reduced the debt by another 33%. The result is the inflation adjusted median income increased 16% from 1923 to 1929.
Congress (including the Republicans) will never agree to any cuts at all. The stupid neocons in the future defense dept. will never agree to any defense cuts. The only way to achieve this amount of cuts is to "shut down" the federal government for a year. There are two chances that this will succeed, slim and none.
Combined Social Security and Medicare deficit starting in 2034 when their trust funds run dry is $6 trillion, so eliminating even $2 trillion per year which would be a gargantuan task would get us only 1/3 of the way. You would have to eliminate the military entirely 6 times over. Not going to happen. No Republican or Democrat President will dare cut SS - imagine the oppo ads about heartless President So-and-So making granny eat cat food (despite the fact seniors are the wealthiest cohort). The path is clear - Social Security payments will not be cut nominally and instead we will print money to fill the gap sparking high inflation but the CPI will somehow always be around 2-3% due to continual "adjustments" of the calculation method.
This must go through Congress and that will not be a small task. If you look at this rationally, there are about 10 major programs that are causing the issue. Fix those and the problem mostly goes away.
There's 300 billion + dollars in Medicare fraud per year. Put the entire damn Federal government on the block chain to increase transparency and eliminate the chicanery of scammers. Sorry, I meant politicans...
While I am excited about the possibilities, I fear nothing much can change. Not to rain on anyone’s parade but reality:
the Department of Government Efficiency (DOGE) is not a real department. It exists outside of government and has no authority to do anything. Like any one of a number of independent think tanks that already exist, it's free to make any recommendations it wants, and the government is free to ignore them all. Even if the Trump administration actually proposes some of the DOGE recommendations, they mean nothing unless Congress votes to pass them, but I think there will be to much consternation for anything to pass.
Definitely will not get Democrats to vote yes to eliminate any government department or agency.
So the House will need over 98% of Republican votes. I am thinking that will not happen due to many RINOs still in the House
If it does gets through the house it will need 60 votes in the Senate, which Republicans do not have enough and again can’t imagine any democrats voting yes.
firing government workers - virtually impossible due to the civil service unions. The best Trump and team can do is allow the workforce to shrink naturally through attrition which will help but the savings over the course of his term will be minimal.
And it all better happen quickly, I.e. within the first two years because public has short term memory so guessing Republicans lose the House in the midterms which is normal for the party in power.
I "hope" for some good changes from DOGE but reality says probably not a lot will change…
I say cut anywhere and everywhere, but I would start with the easy stuff first. I would start with the militarism budget and the Department of Offense. The pentagon cannot even pass an audit! Bring all the troops homes and abolish all foreign aid, including aid to Israel. Shut down the American empire of bases and stop fighting useless wars both proxy and hot.
Fuck both Ukraine and Israel. The proxy war against Russia is leading down the path to nuclear war. Everybody dies! All because the Biden Administration authorized the use of missiles to attack Russia. This is something Trump would have never done. No war for Israel. A war with Iran for Israel could also escalate to nuclear war because of the complex interlocking alliances involved. I am not so sure that Trump would not take this disastrous step that could also lead to WW3.
What does all this have to do with slashing spending? These wars are expensive. Iraq, which Trump opposed, Afghanistan, Syria, and others have played no small part in the exploding debt crisis.
I will give a preemptive approval to your spending cuts. I will endorse any proposal to cut spending. Like I said I would cut anywhere and everywhere. Before asking Americans to accept the more painful cuts that would be needed to get the American fiscal house in order(to the extent that is possible at this point) I would start with the easy and painless (unless you are a war profiteer) cuts I mentioned above.
Disagree in point. We need Ukraine to win or at least get a winnable draw. It's not our blood on the line so let's be the depot of freedom. Bloody his nose enough and he will withdraw. Failure in Ukraine is likely to lead to our kids and/or grandkids blood being spilled. History spells this out clearly. Ukraine is not like Vietnam. It is strategically important and big enough to matter. Don't forget China is taking notes on this. Stop Putin and you stop them as well. You may disagree. Fine. The real problem with spending is outside of the DOD realm. Mandatory spending is over 60% of the US Budget. The problem is mainly there. DOD is secondary.
The United States has just bombed Russia! In light of Putin’s new nuclear doctrine this could lead to WW3. This is Insane. What would your reaction be if Russia was waging a proxy war through Canada or Mexico designed to weaken the United States and reduce it to the status of a second rate power. What would your reaction be if Russia effectively bombed targets in the United States? You would be crying bloody murder! This war could have been avoided. There was a peace agreement on the table that was sabotaged by the United States. Hundreds of thousand of lives, both from Ukraine and Russia could have been saved. The lives of both Russians and Ukrainians matter. Your willingness to sacrifice the lives of so many young Ukrainians is beyond disgusting. Ukraine could have been rebuilt in a in a beautiful fashion with all the money spent waging this proxy war.
I do agree with you that painful cuts in both in Medicare and Social Security will have to be made. I said I would cut anywhere and everywhere. I also stand by my statement about making the easy cuts first before asking American to accept these painful cuts. I cannot think of any better way to start than by cutting the militarism budget and the department of offense. The pentagon cannot even pass an audit. Fighting senseless and expensive wars, ending all foreign aid, bringing all the troops home, and dismantling the American empire of bases seems as good a place to start as any.
If you are familiar with this Substack you would know that am not a Donald Trump fan. My primary interest has always been economics and I think Trump’s economic policies would be a disaster. However, whatever criticism you have of Trump he would have never authorized the use of missiles to strike inside Russia, and he has made clear that he wants to end the proxy war against Russia. This is an issue that cannot be gainsaid
I appreciate your enthusiasm. I will continue to disagree about Russia. I know a bully when I see one. Dealt with some throughout my childhood. Having spent time in Russia, I have learned how the political class collectively thinks. No matter where you stand on the war, expect another one in ten years or less once this one is done. I am also concerned about Trump. Biden is just worse so would have been Harris. I agree the budget needs taming or all of us are going to pay a heavy price. If we were a banana republic that likely would have happened already. Wish you the best in the future.
Let’s see. My brain is not fully functioning at 4:20 AM, but slashing Federal spending is a piece of cake. Eliminate all foreign aid.
Delete most of the useless, corrupt 3-letter agencies such as the IRS, Dept of Education, FDA, DEA, ATF, CIA, FBI.
Cut defense spending by 1/2. Privatize HHS. Turn all Federal properties over to the States.
That’s just for starters.
From Luke Gromen....If incoming Trump officials promise to cut spending before devaluing US debt/GDP down to 70-80% of GDP or otherwise significantly weakening the USD, or heaven forbid actually start cutting spending, investors should buy USD and sell everything else, a la 2022 and 3q23.
If Trump, Musk, Vivek, Bessent etc. make the mistake of starting to cut spending BEFORE devaluing US debt/GDP, the US will suffer an economic and debt crisis of GDP down, stocks down, rates up, USD up, a la 2022 on steroids, and politically they would be risking setting the table for Democrats to sweep back into Congress in 2026, rendering Trump a lame duck in 2026, and kneecapping Vance’s 2028 presumed presidential odds.
That is the game the Democrats were playing with Harris/Walz - the long game. I don't believe they fully anticipated the congressional losses, but they've shown they are in it to win it for the long run.
How are theTrump admin going to lower the deficit while cutting taxes and promising to "spend big? BTW do you think they will cut subsidies on Teslas?😂
This all coming from the man who, despite his second paragraph, oversaw under Reagan the beginning of a 45 year trend of increased debt to GDP. I was there. Tax cuts will pay for themselves they said. They didn't. His facile essay here reminds me of the fable "Belling the Cat".
Im very skeptical they will be able to get anything done at all. All they have the legal authority to do is make recommendations.
These amounts of spending cuts are not unprecedented. President Harding took office during the Depression of 1920, which was the blow-off of the WW1 bubble. He was the first president to even have a budget. He reduced spending from $6.3 Billion in 1920 to $3.3 Billion in 1922, a 47% decrease. The national debt was also reduced by 33%. This caused the Depression of 1920 to end in 18 months, and by many metrics, it was a sharper decline than the Great Depression. Not to be outdone, President Coolidge reduced the debt by another 33%. The result is the inflation adjusted median income increased 16% from 1923 to 1929.
Congress (including the Republicans) will never agree to any cuts at all. The stupid neocons in the future defense dept. will never agree to any defense cuts. The only way to achieve this amount of cuts is to "shut down" the federal government for a year. There are two chances that this will succeed, slim and none.
Combined Social Security and Medicare deficit starting in 2034 when their trust funds run dry is $6 trillion, so eliminating even $2 trillion per year which would be a gargantuan task would get us only 1/3 of the way. You would have to eliminate the military entirely 6 times over. Not going to happen. No Republican or Democrat President will dare cut SS - imagine the oppo ads about heartless President So-and-So making granny eat cat food (despite the fact seniors are the wealthiest cohort). The path is clear - Social Security payments will not be cut nominally and instead we will print money to fill the gap sparking high inflation but the CPI will somehow always be around 2-3% due to continual "adjustments" of the calculation method.
This must go through Congress and that will not be a small task. If you look at this rationally, there are about 10 major programs that are causing the issue. Fix those and the problem mostly goes away.
There's 300 billion + dollars in Medicare fraud per year. Put the entire damn Federal government on the block chain to increase transparency and eliminate the chicanery of scammers. Sorry, I meant politicans...
Good read!
While I am excited about the possibilities, I fear nothing much can change. Not to rain on anyone’s parade but reality:
the Department of Government Efficiency (DOGE) is not a real department. It exists outside of government and has no authority to do anything. Like any one of a number of independent think tanks that already exist, it's free to make any recommendations it wants, and the government is free to ignore them all. Even if the Trump administration actually proposes some of the DOGE recommendations, they mean nothing unless Congress votes to pass them, but I think there will be to much consternation for anything to pass.
Definitely will not get Democrats to vote yes to eliminate any government department or agency.
So the House will need over 98% of Republican votes. I am thinking that will not happen due to many RINOs still in the House
If it does gets through the house it will need 60 votes in the Senate, which Republicans do not have enough and again can’t imagine any democrats voting yes.
firing government workers - virtually impossible due to the civil service unions. The best Trump and team can do is allow the workforce to shrink naturally through attrition which will help but the savings over the course of his term will be minimal.
And it all better happen quickly, I.e. within the first two years because public has short term memory so guessing Republicans lose the House in the midterms which is normal for the party in power.
I "hope" for some good changes from DOGE but reality says probably not a lot will change…
I say cut anywhere and everywhere, but I would start with the easy stuff first. I would start with the militarism budget and the Department of Offense. The pentagon cannot even pass an audit! Bring all the troops homes and abolish all foreign aid, including aid to Israel. Shut down the American empire of bases and stop fighting useless wars both proxy and hot.
Fuck both Ukraine and Israel. The proxy war against Russia is leading down the path to nuclear war. Everybody dies! All because the Biden Administration authorized the use of missiles to attack Russia. This is something Trump would have never done. No war for Israel. A war with Iran for Israel could also escalate to nuclear war because of the complex interlocking alliances involved. I am not so sure that Trump would not take this disastrous step that could also lead to WW3.
What does all this have to do with slashing spending? These wars are expensive. Iraq, which Trump opposed, Afghanistan, Syria, and others have played no small part in the exploding debt crisis.
I will give a preemptive approval to your spending cuts. I will endorse any proposal to cut spending. Like I said I would cut anywhere and everywhere. Before asking Americans to accept the more painful cuts that would be needed to get the American fiscal house in order(to the extent that is possible at this point) I would start with the easy and painless (unless you are a war profiteer) cuts I mentioned above.
Disagree in point. We need Ukraine to win or at least get a winnable draw. It's not our blood on the line so let's be the depot of freedom. Bloody his nose enough and he will withdraw. Failure in Ukraine is likely to lead to our kids and/or grandkids blood being spilled. History spells this out clearly. Ukraine is not like Vietnam. It is strategically important and big enough to matter. Don't forget China is taking notes on this. Stop Putin and you stop them as well. You may disagree. Fine. The real problem with spending is outside of the DOD realm. Mandatory spending is over 60% of the US Budget. The problem is mainly there. DOD is secondary.
The United States has just bombed Russia! In light of Putin’s new nuclear doctrine this could lead to WW3. This is Insane. What would your reaction be if Russia was waging a proxy war through Canada or Mexico designed to weaken the United States and reduce it to the status of a second rate power. What would your reaction be if Russia effectively bombed targets in the United States? You would be crying bloody murder! This war could have been avoided. There was a peace agreement on the table that was sabotaged by the United States. Hundreds of thousand of lives, both from Ukraine and Russia could have been saved. The lives of both Russians and Ukrainians matter. Your willingness to sacrifice the lives of so many young Ukrainians is beyond disgusting. Ukraine could have been rebuilt in a in a beautiful fashion with all the money spent waging this proxy war.
I do agree with you that painful cuts in both in Medicare and Social Security will have to be made. I said I would cut anywhere and everywhere. I also stand by my statement about making the easy cuts first before asking American to accept these painful cuts. I cannot think of any better way to start than by cutting the militarism budget and the department of offense. The pentagon cannot even pass an audit. Fighting senseless and expensive wars, ending all foreign aid, bringing all the troops home, and dismantling the American empire of bases seems as good a place to start as any.
If you are familiar with this Substack you would know that am not a Donald Trump fan. My primary interest has always been economics and I think Trump’s economic policies would be a disaster. However, whatever criticism you have of Trump he would have never authorized the use of missiles to strike inside Russia, and he has made clear that he wants to end the proxy war against Russia. This is an issue that cannot be gainsaid
I appreciate your enthusiasm. I will continue to disagree about Russia. I know a bully when I see one. Dealt with some throughout my childhood. Having spent time in Russia, I have learned how the political class collectively thinks. No matter where you stand on the war, expect another one in ten years or less once this one is done. I am also concerned about Trump. Biden is just worse so would have been Harris. I agree the budget needs taming or all of us are going to pay a heavy price. If we were a banana republic that likely would have happened already. Wish you the best in the future.
Hmmm....Pentagon budget? How many toys do they really need?
And then there's politics that seem more important than the common good.
I've got a chainsaw that I'm not using right now......
Enforce the enumerate powers. That authority is right there in the constitution.
https://open.substack.com/pub/alexanderscipio/p/the-doge-duo-federal-efficiencies?r=ownpk&utm_medium=ios
I read Stockmans book a few years ago. He really knows the federal budget. Please send parts 2 and 3 when published. That’s!