Trump’s budget indicates $163 billion cuts

After launching the tariff attack on America’s business and trade partners across the globe, President Donald Trump is turning inward as it were, and doing the things he believes will help America become great again. While the tariffs were increased, he is cutting down government budgetary support for what he believes to be wasteful expenditure.

And in this category of wasteful expenditure he includes education and other social welfare measures that are meant to help Americans struggling to make ends meet. The White House Office of Management and Budget has proposed a cut of $163 billion in the 2025 budget. And true to his offensive credo, he has increased expenditure for defence and for homeland security.

The defence budget has been increased by 13 per cent, and the homeland security budget by 65 per cent. Non-defence discretionary spending has been cut down by 23 per cent. The Office of Management and Budget (OMB) Director Russ Vought said, “At this critical moment, we need a historic budget – one that ends the funding of our decline, puts Americas first, and delivers unprecedented support to our military and homeland security.”

In his decision to impose tariffs across the board against all of America’s trading partners, Trump seems to believe that drastically cutting down government budgetary support for education and other welfare measures would save money for the government. While making the cuts in the budget, the President has also announced tax-cuts. So, the government’s revenues would go further down, and his belief that he would bail out the federal government with a $36 trillion debt. Experts believe that the $5 trillion in tax cuts would only add to the deficit burden.

Trump’s economic thinking follows the simplistic logic that raising tariffs would mean that Americans would cut down their buying of foreign goods, that this would induce foreign manufacturers, including American manufacturers, to produce things in America, and create employment as well as increase American exports. And he believes that by giving tax breaks, he will attract American manufacturers to make things at home. And cutting down on welfare and humanitarian measures would save money for the government. President Trump does not seem to understand that as the world’s most advanced economy, things are not running on simplistic calculations, and that the markets follow their own logic of both demand, and also the logic of speculation. America’s consumption levels do not remain at consistently high levels, and when the demand goes down, the industrial production cycle goes into a spin.

It is also not certain that when manufacturers return to America, they will create enough jobs for everybody, and whether the American supply of workers with required skills is sufficient to boost American manufactures. The market hinges on too many uncertainties. It involves the market players reinventing themselves as the mode of demand changes. While technological breakthroughs threaten to kill demand for jobs, there is as yet no sign that other kinds of jobs will be created. The new jobs are sure to emerge from the green sectors, but that will take time. It will need the workers to be re-skilled, and the need for a different kind of education. If the government does not spend on education to create the new workforce, then the manufacturers will suffer because they would not find the workers they need, and the people who need jobs would remain stranded, at least some of them for some of the time.

The government would need to step in. But Trump with his dogmatic view of what is wrong with the American economy will refuse to step in to strike the balance and avoid social and economic instability.