Uncertainty and Trumponomics

President Donald Trump’s funding cuts, freezes, and federal-worker firings may not sink the economy all by themselves, but they’ll affect research and development, investment, and business expansion. The entire economy. Ultimately, this harms U.S. productivity, a measure of efficiency defined as units produced relative to hours worked, or net sales relative to labor hours.

            Illegal layoffs of federal workers, mass deportations, threats and confusion over tariffs, and Medicaid spending cuts are all bad for the economy. Such policies are creating unprecedented levels of economic uncertainty.

Uncertainty, all by itself, can seriously threaten the economy, according to economist Josh Bivens of the Economic Policy Institute.

            In North Carolina, changes to National Institutes of Health medical research funds could rob the Research Triangle’s economy of hundreds of millions. A U.S. District Court judge has halted, for now, those changes after 22 states sued.

            Several Trumponomic policies seem odd coming from the self-proclaimed free-market businessman operating alongside his tech-wizard vice-president. For instance, someone in the administration still believes tariffs—on our largest trading partners—protect jobs instead of scaring consumers and businesses, as partners' retaliatory tariffs raise prices.

            Nobel-winning economist Joseph Stiglitz has said, “Virtually all economists think that the impact of the tariffs will be very bad for America and for the world . . . they will almost surely be inflationary.”

            Already, the economy’s grumpy, judging by consumer sentiment, inflation-expectation surveys, and stalled business investment, according to recent surveys. Local economies bracing for fiscal support cuts may need tax increases or municipal bond offerings to stabilize budgets, policies that fuel economic uncertainty.

            “All the uncertainty around trade policy, uncertainty around some things that the Department of Government Efficiency is doing, I think, will have a chilling effect on investment plans and expansion plans,” economist Michael Strain of the American Enterprise Institute, told the New York Times.

             Trump’s tariffs, economists say, will add to inflation and slow economic growth, which hurts workers and productivity. American consumers will pay for his tariffs.

            The president’s freezes on federal funding have already hurt domestic farmers who send billions-worth of products through American foreign aid programs. Policies have already begun to affect Head Start programs.

The labor market, now at 4 percent unemployment, is also at risk.

            Even some Republican legislators worry about economic fallout. “Dozens of Alaskans — potentially over 100 in total — are being fired as part of the Trump administration’s reduction-in-force order for the federal government,” U.S. Sen. Lisa Murkowski, R-Alaska, posted on X. “Many of these abrupt terminations will do more harm than good, stunting opportunities in Alaska and leaving holes in our communities.”

            On March 18, a federal judge blocked further cuts, ruling that USAID’s “dismantling” likely violates the constitution. The judge also ordered Trump administration email and computer access be restored to USAID employees. The State Democracy Defenders Fund filed a lawsuit. This nonprofit’s executive chair, Norm Eisen, calls the judge’s ruling “a milestone in DOGE pushback. “They are performing surgery with a chainsaw instead of a scalpel, harming not just the people USAID serves, but the majority of Americans who count on the stability of our government.”