Shortly before Milton Friedman’s death in 2006, I had the privilege of interviewing him over dinner in San Francisco. The last question I asked him was: What are the three things we have to do to make America more prosperous?
I have never forgotten his answer: “First, allow universal school choice; second, expand free trade; third and most importantly, cut government spending.” That was long before Barack Obama and Joe Biden came along.
There aren’t too many problems in America that can’t be traced back to the growth of a big and incompetent government.
It is notable that the two big bursts of inflation during modern times both occurred when government spending exploded. The first was the gigantic expansion of the Lyndon B. Johnson “war on poverty” welfare state in the 1970s, with prices nearly doubling. Second was the post-COVID-19 spending blitz in the last year of Donald Trump’s first term, followed by the Biden $6 trillion spending spree, with the Consumer Price Index sprinting from 1.5% to 9.1%.
Coincidence? Maybe. But I doubt it.
The connection between government flab and the decline in the purchasing power of the dollar is obvious. In both cases, the Washington spending blitz was funded by the Federal Reserve’s money printing. The helicopter money caused prices to surge. (I still find it laughable that 11 Nobel Prize-winning economists wrote in the New York Times in 2021 that the Biden multitrillion-dollar spending spree wouldn’t cause inflation. Were they on hallucinogenic drugs?)
The avalanche of federal spending hasn’t stopped even though the COVID-19 pandemic ended over a year ago. We are three months into the 2025 fiscal year and on pace to spend an all-time-high $7 trillion and borrow $2 trillion. If we stay on this course, the federal budget could reach $10 trillion over the next decade.
This road to financial perdition cannot stand. It risks blowing up the Trump presidency.
Upon entering office, Trump should, on day one call for a package of up to $500 billion of rescissions — money the last Congress appropriated but has not been spent yet. Canceling the green energy subsidies alone could save nearly $100 billion. Why are we still spending money on COVID-19?
We could save tens of billions of dollars by ending corporate welfare programs — such as the wheelbarrows full of tax dollars thrown at companies like Intel in the CHIPS Act. The Elon Musk Department of Government Efficiency is already identifying low-hanging fruit that needs to be cut from the tree.
Along with extending the Trump tax cut of 2017, this erasure of bloated federal spending is critical for economic revival and for reversing the income losses to the middle class under Biden.
This is especially urgent because the curse of inflation is NOT over. Since the Fed started cutting interest rates in October, commodity prices are up nearly 5%, and mortgage rates have again hit 7%, in part because the combination of cheap money and government expansion is a toxic economic brew — as history teaches us.
Nothing could suck the oxygen and excitement out of the new Trump presidency more than a resumption of inflation at the grocery store and the gas pump. Trump’s record-high approval rating will sink overnight if the cost of everything starts rising again.
Cutting spending won’t be easy. The resistance won’t just come from Bernie Sanders Democrats. He will have to convince lawmakers in his own party — many of whom are already defending Green New Deal pork projects in their districts.
Trump should borrow a line from Nancy Reagan: Just say no — to runaway government spending. Say yes to what Friedman titled his famous book: “Capitalism and Freedom.”
Stephen Moore is a visiting fellow at the Heritage Foundation. He is also an economic advisor to the Trump campaign. His new book, coauthored with Arthur Laffer, is “The Trump Economic Miracle.”
COPYRIGHT 2024 CREATORS.COM
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
We need to repeal the NIxon automatic budget increases. Talk about a stupid idea that never had a time….
The only way to put the country on the right track would be by totally gutting the welfare state. If that is not dismantled any change will only be a band aid where stiches are necessary.
All good stuff but as a practical matter, irrelevant.
These three things we know are true:
1) Congress will not come close to balancing the budget;
2) Congress will raise (or suspend) the debt ceiling;
3) President Trump will sign legislation enacting both #1 and #2 above driving our National Debt higher by trillions over the next two years..
Trump should do a lot of things but going easy on spending will never be one of those things. I love the guy but I was also there the entire length of his first term and never once were the financial printing presses allowed to cool down that entire time. Then Brandon came along and installed turbo’s on those presses and now the nation is DEAD
Beware any politician who says, “Our state has a $5 billion surplus. We’ll announce how we plan to spend it.”
Well, the sensible choice is to return it to the taxpayers. NC Governor Roy Cooper just couldn’t let go of that bundle of cash. He has been replaced by a new Democrat governor, but I’m not optimistic he’ll do the right thing either.
I’ve heard that those stupid EV charging stations must be built by union labor, and those companies must prove that they adhere to DEI principles. That supppsedly explains the slow rollout. Lose-lose once again.
How can any cuts be made permanent (if possible) and not reversible by the next administration?
It’s easy to blame the government 100% for the situation we’re in; but who’s really to blame? I say it’s mostly on the US Citizens who keep voting the career criminals back into office based on promises of “free stuff” and other BS. We must take back the schools and educate our people on the US Constitution and true history, instead of some bastardized version being pushed by the demoncraps. No more of this DEI garbage. No more of this “no student left behind” nonsense. If you can’t pass the tests, then you fail…simple. We’ve been mollycoddling people for too long and this has been a huge contributor to why we’re in the situation we’re in now. People have become lazy and complacent and instead of reviewing their employees in government, they just let it go to maintain the status quo, allowing these bad employees to continue lining their own pockets at the expense of the American Citizens. THEN, they squawk around about term limits. We have term limits. It’s called an election. Vote the bad employees out of office or work to have them expelled from Congress.
Sorry for the rant, but it makes me so angry when everyone points fingers at those crooks sitting in office like they are 100% responsible for everything. It’s not like these cretins were sprouted in office and there’s nothing anyone can do to get them out. Vote them out!!! Hold your representatives and congressmen and women accountable for what they do. If they’re doing something you don’t like or agree with, call them, write them, and let them know. These individuals are NOT lord and master. They work for “We the People.” We certainly don’t work for them.
IF OUR FEDERAL GOVERNMENT CAN SHOW THE POLITICAL COURAGE TO CUT SPENDING BY 50% DURING THE NEXT TWO YEARS, IT WILL BE SHORT TERM PAIN FOR LONG TERM GAIN.
Excellent article,but since most Americans today look to government as their savior,I don’t see how they are going to become independent of government and accept a much smaller government.Maybe,when we get as bankrupt as Argentina,Americans will accept the Milei prescription.
Thanks for a great article & should be a wake up call to all, including Congress! I would like to see a thorough autopsy done on three items that concern me & I feel are huge factors for future inflation increases. And they are 1) College costs have gone up 20% per year since about 2000 2) CEO & top management of companies are getting paid 300-400 times what the company average worker is paid 3) What happened to housing & rental costs in USA and it does not appear they are coming down .
My summary opinion, the middle class is the most important component for a great USA and they brought this country out of The Great Depression by their hard work ethics & the top class does not seem to recognize their efforts like companies did in 1950-60-70 and even 80s.
The Dem/Socialists/Communists have set out to Destroy The USA even if they have to Bankrupt the US to accomplish their agenda
WHY?,corruption! a lot in politics.Short and not so sweet.
Sadly republicans are just as guilty with spending even though they talk about spending restraint ! , we need to cut the expansion of government and cut waste and corruption on both sides !
Of course, Biden did what he could to hurt us all, even his own constituents, by keeping gasoline prices high before leaving Office. Sadly, we I continue being lost in the corruption of the “entitled”, instead of putting them out to pasture.
Government bloat and overspending is incredible. There will be blowback… but if Trump, Musk and Vivek are determined, they will get it done. There is so much about America that’s good… but so much that is very wrong and needs to be fixed. The Democrats have ruined almost everything they touch.
“expand free trade”???
I hope that Trump & his team take a hard look at the impact of his tariffs, as they could send inflation as a rocketman would. Cannot believe that Vance defended tariffs in debate & said that their economists were smarter than all the others. BEWARE OF WHAT YOU DO WITH TARIFFS as you might not be able to undo the damage .
The rise of inflation during the 1970s was caused by Jimmy Carter’s Wage and Price Freeze. Johnson was not President in the 70s.