Trump’s OMB director has suggested he’ll institute mass firings and agency closures, but no one in the White House seems to grasp the economic impact of such moves.
A grimly determined Russell Vought in an AI video circulated by President Donald Trump
In one of my favorite videos on YouTube, a group of African mercenaries are sitting around a campfire with a chimpanzee. One of them thinks it would be amusing to hand the chimp a loaded AK-47. It takes the weapon, and after dancing around with it a bit, puts its finger on the trigger and starts firing randomly around the campsite. The mercenaries go frantically scurrying off in all directions. That is how we can view President Donald Trump’s noble stewardship of the nation’s economic policy.
We’re heard a lot about the vile Stephen Miller, whose self-appointed mission is to persecute people of color—and US Supreme Court Chief Justice John Roberts, who puts a legal seal of approval on whatever the president chooses to do. Now we are hearing more about a third monkey, Russell Vought, Trump’s head of the powerful Office of Management and Budget, who is superintending the MAGA shutdown of the federal government.
Vought’s last major bout of notoriety came via his lead role in marshaling the Heritage Foundation’s Project 2025 blueprint for a second Trump term—a massive document laying out a detailed plan to subject most of the country to Christian nationalist persecution fantasies that became so reviled that Trump denied any connection to it, or even knowledge of what it was. Despite knowing nothing about it, he also said he agreed with some it and disagreed with other parts. Now Trump is promoting Vought, in one of his Truth Social posts about the fallout from the government shutdown, as “he of PROJECT 2025 fame”; just to drive the point home, Trump then posted an AI video depicting Vought as the Grim Reaper, and exulted that the shutdown would unleash a fresh torrent of assaults on federal workers and agencies.
In reality, the shutdown is the latest stage in the dismantling of the federal non-defense public sector—the array of services and public goods that Trump guru Steve Bannon called “the administrative state” and targeted for elimination. One reason that the latest MAGA siege on American governance hasn’t been that difficult to carry out is that the federal sector has been steadily hollowed out for decades, under the leadership of presidents from both parties, since Richard Nixon in 1970.
Federal employment is not far from where it was then, when the US population was much smaller and there was much less work for the feds to do. Back them, federal employment was as high as 3 million, as the Vietnam War raged. The most recent number is 2.9 million. Of that, about 1.4 million are in the fepartments of Defense, Homeland Security, and Veterans Affairs.
For all the talk of legions of intrusive bureaucrats, the federal government doesn’t actually do much. It mostly mails checks to medical care providers, Social Security beneficiaries, and state and local governments. That’s why a wag described it once as a giant insurance company with an army. If Vought succeeds with his latest round of attacks on federal agencies, it will do much less. In the wake of a half-century’s worth of steady federal downsizing, a random cut is more likely to hit muscle and bone, rather than fat, in actual services provided; that specter is less dire in the check mailing business—until, that is, Vought, Trump, and their cronies start in on additional cuts to income supports beyond those enacted in the massive tax-and-spending act that Trump signed into law this spring.
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The cuts are routinely described by Vought as the elimination of “unconstitutional” implementation of “DEI” (diversity, equity, inclusion) policies. Since no analysis has been offered spelling out just what DEI is or what is supposedly unconstitutional about it, Vought is just saying, “We are doing this, and if you don’t like it, tough.” In less nuanced language, Trump has described the targets of cuts as “Democrat agencies” and what they do as a “scam.”
For all Trump’s claims about cutting spending people don’t like, his indiscriminate hits on employment and insurance coverage will wreak havoc in red states as well as blue ones. His promises to focus on governors who say unkind things about him disguise the reality that even a small reduction in employment or health care is more noticeable in one of the lower-population red states that wield clout in Congress disproportionate to their electoral size.
I worked in the federal government for the 2013 shutdown, which lasted from October 1 to October 17. It was a sweet paid vacation. I was able to volunteer and work for free at my old stomping ground, the Economic Policy Institute. It’s not clear whether those furloughed now will ever be made whole. What we have now amounts to another lockout. During my shutdown furlough, I suggested that the federal employee unions stage a “work-in,” continuing to serve the people. There was some interest, but it never came off. It would have been illegal, but imagine a DC jury punishing an employee for participating.
Some of the projected cuts falling under the Trump-Vought-Project 2025 mandate could have a more direct impact on economic growth. As the Congressional Budget Office explains, the longer the duration of a shutdown, the bigger the reduction or delay in federal spending, including to private sector contractors.
There are also agency-specific effects. For instance, reducing the capacity of an agency like the Bureau of Labor Statistics (BLS) is immediately costly to business firms, since they depend on BLS data to make decisions about future commitments of resources. We hear reports of plans for labor market updates and other economic data to be collected and reported less frequently. The sort of overt corruption of data integrity that was signaled by Trump’s firing of the incumbent head of the BLS for purveying what he called “rigged” (read “bad for Trump”) job numbers and his (since-withdrawn) nomination of a certifiable incompetent as her replacement is likely to render most government data reporting suspect. Data from autocratic sources is not reliable data. Just ask anyone who lived under Chairman Mao.
The federal government has already spent $6.66 trillion in Fiscal Year 2025 (since September 2024). A shutdown would have to go on for some time to show up in the aggregate economic data, and the spending reductions would have to be permanent. Contrary to the doomsaying rhetoric on the right, federal salaries are not a large share of total federal spending. Many federal employees in Defense and Homeland Security are exempt from furloughs. Plus, much of the check-writing is on automatic pilot. Individuals with issues will find help from employed humans unavailable, but most of the money will still go out.
Six and two-thirds trillion dollars sure sounds like real money, but we have a GDP of nearly $30 trillion. By international standards, it’s a small government. French government spending as a share of GDP is 57 percent. Imagine what a real US social democracy could do with another 10 or 15 trillion bucks.
It is not yet possible to determine the impact of interrupted government spending changes on the nation’s gross domestic product. Attacks on targeted “Democrat agencies” may be vicious and unjustified, but their national economic impact is likely to be invisible.
We could expect localized, concentrated impacts, due to the residencies of unpaid federal employees. Northern Virginia, the District of Columbia, and suburban Maryland are three ground zeroes. Coincidentally, purple Virginia has statewide elections next month, so a shutdown ought to fortify a blue wave there. Virginia is also the last state from the old Confederacy that still upholds reproductive rights.
Though I have discounted noticeable impacts on GDP from a shutdown, there are a number of signs that the economy was flagging before the breakdown in federal budget legislation. It might be difficult for an economist to put two and two together, but it will not be so for the broader public. The sequence could very well be shutdown, then recession—all after Trump was bragging about his economic acumen and magical powers to make the American economy great again.
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There will also be myriad stories of individual hardship resulting from the cuts, especially to thousands priced out of health insurance and driven to medical bankruptcy. The political environment will be target-rich—provided that Democrats are imaginative enough to turn it to their advantage. As Jared Bernstein, the former head of the Biden White House’s Council of Economic Advisers, wrote of the economic landscape in this second Trump term, “If Ds cannot elevate this and explain clearly and forcefully how they’re going to change it, then they need to find new lines of work.”
The most recent BLS unemployment rate is 4.3 percent, historically very low. Any month-to-month change, even if negative, should be discounted as meaningless. More to the point, job growth for the past three months suggests a slowdown. People are apt to reach for any rock they can throw at the White House, but at least for now, the economy is still pretty good; thank Joe Biden and Nancy Pelosi. The wonder is the extent of Trump’s polling unfavorables in a land of 4.3 percent unemployment.
There will be time to blame Trump when things go south, as they undoubtedly will before 2028. We are due for a recession, no matter what Trump does. As Aragorn says at Helm’s Deep in The Lord of the Rings: “Show them no mercy, because you shall receive none.”
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