The federal budget remains a disaster, and for all the splashy talk of cost-cutting and tariff-driven revenue, Americans know it. Especially galling is that the latest fiscal wreckage is being overseen by an administration that promised business acumen and conservative restraint. Republicans are delivering the opposite: a self-inflicted destruction of wealth, rising interest rates, creeping inflation fears and an abandonment of even their usual pretense of fiscal discipline.
The Cato Institute’s new national fiscal policy survey results confirm that Americans don’t trust politicians to manage our money. Seventy-six percent say the federal government spends too much. An astonishing 85% say the past decade’s spending spree has either had no impact on their quality of life or made it worse.
That’s a damning indictment of the stunning deficits of the first Trump administration, unhinged Biden administration spending and Republicans who, until very recently, at least pretended to care about fiscal sanity, including being realistic about the need to reform entitlement programs.
Ninety-eight percent of Americans believe there’s at least some waste, fraud and abuse in federal spending, and two-thirds think that there’s a lot. The public now estimates that 59 cents of every federal dollar is wasted — the highest amount recorded since Gallup began asking that question in 1979.
This isn’t the view of a crank minority: Eighty-nine percent of Americans, including 99% of Republicans, support a full audit of federal spending.
You’d think that would be a wake-up call, especially when the debt picture is deteriorating so rapidly. According to the Treasury Department, as of this month — only halfway through the fiscal year — we’ve already posted a deficit of $1.3 trillion. Interest payments alone crossed the $500-billion mark, crowding out almost everything else. So much for the “low interest rates forever” fantasy.
About those high interest rates: One of the more absurd economic notions floated by the Trump administration is that tariffs, by rattling markets as they did last week, would help. Supposedly, panicked investors would flee to U.S. Treasuries, driving down interest rates and enabling cheaper refinancing of the debt. That was the theory, anyway, until markets crashed so badly that investors started dumping bonds and rates rose.
The key issue is what financial columnist Jon Sindreu described as the administration “upending the global trading system.” Instead of making government debt safer, it made investors wary of holding U.S. financial assets. The yield on 10-year Treasury bonds has since gone up, not down.
That’s especially troubling given that roughly one-third of government debt matures in under a year. Protectionist policy has collided with budgetary recklessness, and the coming refinancing will bring an expensive tab instead of relief. We’ll pay more to borrow than ever before.
Let’s not forget inflation. Speaking at a business journalism conference, Federal Reserve Chair Jerome Powell stated that Trump’s tariffs were “significantly larger than expected” and their economic effects — including higher inflation and slower growth — are likely to be similarly substantial. Fighting inflation will require raising interest rates, which again will raise interest payments and the deficit.
On top of that, Republicans are preparing to extend the Trump tax cuts. There are reasonable ways to do it, but they seem poised to tack on new cuts, some more politically motivated than economically sound. This comes without the necessary spending cuts or structural reforms to offset lost revenue. The result? A ballooning deficit, a shrinking revenue base and no long-term plan. This isn’t supply-side economics. It’s magical thinking.
OK, but what if tariffs raise trillions in revenue, as administration officials have bragged? That’s not a win.
No, it’s just another way of saying they’ve levied the largest tax increase in U.S. history on American consumers. And it’s certainly not what voters had in mind when they heard “America First.” We shouldn’t count on this revenue, if it ever materializes, to lower debt relative to GDP. Fiscal adjustments based on higher taxes usually don’t. They do, however, slow the economy in the short and long term.
And what about DOGE, the so-called Department of Government Efficiency? Well, apparently Elon Musk and his team will cut $150 billion, not the “at least” $2 trillion once promised. I’m grateful they’re cutting some spending, but let’s face it, it’s a drop in the bucket of red ink.
Republicans cannot keep sleepwalking into the same fiscal mistakes Democrats made by trading long-term stability for short-term political gain, blowing up the budget for convenience and hoping voters don’t notice. Because voters are noticing.
They know Washington wastes their money. They know budget deficits matter. And they’re desperate for someone — anyone — to act like a responsible adult. The question is whether Republicans, who still have a mandate for change, will answer the call.
Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. This article was produced in collaboration with Creators Syndicate.
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