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Uncertainty's Economic Costs

By Patrick White

General Trends

There has been a great deal of discussion lately about fraud and waste. Most agree we don't want that in our government. Identifying fraud and waste, however, is distinctly different than the scale of government destruction we are now witnessing. You don't solve problems by tearing it all down. You just don't.

The dismantling of USAID has little to do with improving efficiency. It has everything to do a policy sea change of eliminating foreign aid and nearly a century of benefits associated with it. For generations, Congress funded aid with the support of the President. This President bypassed Congress and upended our tripartite form of government. The result will be famine, the spread of disease, and more vulnerability to terrorism at home and abroad.

The disruption in the National Park Service will cost our economy thousands of jobs, not just with government workers, but with the many small business owners and staff who rely on tourism at these destinations.

The disruption at the United States Postal Service will cost our economy thousands of jobs, not just with government workers, but within the ranks of the nearly 400,000 workers employed by the commercial printing industry.

Local Municipal Budget Concerns

It is far too early to tell what the impacts will be on local governments and resources. Here are some warning signs, however.

DEI Stand-Off. The Trump Administration is already seeking to defund its political opponents. It has threatened to defund states that offer Diversity, Equity, and Inclusion programs. Equally troubling, the administration recently sued the Massachusetts Interscholastic Athletic Association over its transgender policy, putting at risk a small nonprofit that serves over 380 high schools in Massachusetts.

School District Budgets. It is unknown how the Trump Administration's proposal to eliminate the Department of Education (DOE) might impact Massachusetts school districts, whose budgets are already enormously stressed due to their reliance on local property taxes. The DOE funds anywhere from 8% to 12% of local school budgets, primarily through Title 1 funding to support low-income students and Special Education funding to offset the enormous costs of providing a constitutionally guaranteed education for special needs students. If these programs are reimagined as block grants, this will not be a crisis. If, however, these programs are defunded, the impact on local districts and local taxes will be severe.

Roads and Bridges. Finally, there is an open question as to whether Mr. Trump will seek to reduce funding for Blue State transportation and infrastructure. Massachusetts has two high priority and very expensive projects in the works: The Allston Interchange and the replacement of the Sagamore and Bourne Bridges. Together, these projects require about $7 billion in funding and will remain the highest priority by the state. In the event that federal funding is reduced or eliminated, this could have a ripple effect in terms of reduction in municipalities' Chapter 90 funding. This actually happened as a result of cost overruns during the Big Dig construction. It can happen again.

Efficiency and disruption are two very different things. The United States economy, up until now the strongest in the world, is about to see first-hand the true cost of disruption.