Proposed federal spending cuts would hurt every state and city. but many Republicans would be on board for philosophical reasons. Where do you come down?

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Ronald Reagan’s “lean budgets” were always dead on arrival for a simple reason: At least one chamber of Congress was controlled by Democrats. So don’t assume the jaw-dropping cuts in the Trump budget will somehow be stopped there this time. Remember, Trump triumphed by stating aloud what most Republicans believe but lack the guts to say in public.

Eliminating or cutting funding for scores of departments, agencies and programs wouldn’t make much fiscal difference in the $4.1 trillion federal budget. As economist Dean Baker points out, foreign aid accounted for only 1 percent of the budget this year, while the threadbare Temporary Assistance for Needy Families (“welfare”) was 0.4 percent.

Beyond the small spending that helps the poor or enriches our lives through the arts or public broadcasting, funding for science and TIGER grants for transit are hugely important for the economy and cities, respectively. (Healthcare research here and state transit projects would be hard hit). Again, these are small elements of total spending that deliver big bangs. One of the biggest, defense, gets an enormous boost from Trump, despite the lack of a Pentagon audit, widespread waste and the Navy’s “Fat Leonard” scandal.

Nevertheless, these represent a philosophical conviction of many, if not most, Republicans today. They long for the federal government of Calvin Coolidge (although Silent Cal had a tiny military). So even if the present budget is “moderated” somewhat, it represents a trajectory that would be a dramatic change for America. In the real world, the U.S. economy is mixed, private sector and government. Going back to the pre-New Deal won’t just hurt Meals on Wheels recipients.

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This Week’s Links:

The rise and fall of personal interest income | Tim Taylor

The man who made us see that trade isn’t always free | Noah Smith

The vanishing middle class and America’s two-track economy | MIT

Life expectancy and health expenditure | Economist’s View

Why raising interest rates this week may have been a bad idea | Wonkblog

Race to the bottom: Cities and states spend $45 billion a year competing for jobs | Naked Capitalism

Soak the poor, feed the rich | Baseline Scenario

Housing bubble deja vu | Project Syndicate


Today’s Econ Haiku:

War in Korea

No sane president would start

A burning question