No, maybe it won't be the end of the world (7)

Continued from (1), (2), (3), (4), (5) e (6) 

One of the most ambitious measures announced by Mr. Trump is the creation of the Department of Government Efficiency (DOGE) led by Elon Musk and Vivek Ramaswamy to cut $2 trillion from the federal budget, more than the government’s discretionary spending for a year. The cuts may make sense, depending on what exactly is cut, but the fact is that the total federal government workforce is now the same size as it was in the late 1960s. 

Mr. Trump has given the DOGE two years to make the cuts, but even so, total federal government spending is about $7 trillion, and subtracting interest on the public debt and mandatory allocations for pensions and health insurance leaves $1.8 trillion, so cutting $2 trillion over two years would mean cutting more than half of payroll spending. Even for Mr. Trump’s megalomania, this sounds like overkill. 

The most likely scenario, and in line with the threats made by Mr. Trump and his loyalists, is that the cuts, whatever they may be, will be a pretext for removing undesirable people.

Another of Mr. Trump’s measures targets the Justice Department, whose independence he wants to abolish by turning it into a personal law department to selectively prosecute his political enemies, as revenge for the prosecutions he has endured. Federal judges are likely to prevent the worst of these ideas from being carried out, but the appointments that Mr. Trump intends to make will only reduce opposition to these measures. 

Other clean-up actions Mr Trump has talked about include firing “woke” generals - after all he was quoted as having privately said «I need the kind of generals that Hitler had». According to some sources, the «transition team are drawing up a list of military officers to be fired, potentially to include the Joint Chiefs of Staff».

When it comes to monetary policy and the Fed, Mr Trump has made no secret of wanting to have a say. Whatever that means, it will not be good news for the Fed's independence - remember what happened to a similar move by President Nixon in the 1970s when inflation was soaring above 10%.

(To be continued)