Category: regulation

Econ 101: Profits

Is it a bad thing for oil company profits to increase when oil prices jump?

A country’s economic wellbeing—its national income and standard of living—is maximized when its economic resources (capital and labor) are allocated to their most profitable uses. When that is the case, no other use of capital and labor can increase the value of total output. This includes goods produced for export in order to pay for goods and services imported.

An economy that has maximized its output in this way (allocated all its resources to their most productive uses), will suffer a drop in income if a tax causes a change in this resource allocation. As an example, consider a tax (called a tariff) on the importation of certain medicines now produced abroad. In fact, President Trump is threatening a 100% tariff on imported generic drugs, with the rate rising to 200% later, if manufacturers do not move production to the U.S. Hopefully it is obvious that if the existing allocation of resources between products and whether they are produced here or there is optimal (maximizing output), then shifting the production of the drugs now produced in India (for example) to the U.S. will result in a fall in our aggregate income. The resources devoted to producing what ever we exported (to pay for our drug imports) would have to be shifted to domestic production of the drugs now imported. We will lose the comparative advantage of the existing allocation. The reallocation will reduce overall output. In short, if the allocation was optimal to begin with, the tariff and reallocation will reduce aggregate income. It is a bad idea.

But what about the jump in oil company profits because of the Iran war induced increase in the price of oil?  When resources are optimally allocated, risk-adjusted profits will be the same everywhere because resources will be moved to where profits are higher (thus lowering them) until they are the same everywhere (risk-adjusted). Oil prices have increased because of the war-related fall in the supply of crude oil. Nothing has changed in the cost of lifting and supplying existing non-war-related supplies of crude. In the real world, of course all kinds of things are changing all the time and it is very desirable for resource allocations to change as well in response. That is precisely what chasing profits does.

The increase in profits from producing the same amount crude in the U.S. from the increase in the world price of oil, creates a profit incentive to allocate more resources to finding and pumping it up. That is very desirable for easing the current supply shortage. An increase in profit is a market incentive to increase the resources devoted to producing something. It would be counterproductive to interfere with that very desirable response.

Foreign Students

The Trump administration finalized a major rule to tighten student visas by ending the “duration of status” policy and imposing a fixed four-year maximum admission cap. https://www.dhs.gov/news/2026/07/16/trump-administration-issues-final-rule-end-foreign-student-visa-abuse   Why? Foreign students benefit the U.S. in a number of ways and we should seek to increase their number.

First: hosting foreign students is an export, it pays foreign money into the U.S. via tuition, room and board and other purchases these students make in the U.S.. The inflow of foreign exchange helps provide us with the means for paying for what we import from abroad. https://wcoats.blog/2025/11/04/trade/

Second: Foreign students gain firsthand experience of life in the U.S., often making lifelong friends. They take this knowledge home improving American relations with other countries. American student benefit from meeting and befriending the foreign students, thus broadening their knowledge of other cultures.

Third: When foreign students decide to remain in the U.S. we benefit from their knowledge and expertise increasing American income and wealth.

According to annual economic impact data calculated by NAFSA: Association of International Educators, foreign students spent and contributed $43.8 billion and supported approximately 378,000 jobs in the U.S. in the 2023–2024 Academic Year. This fell 2% during the next year, which was the first year of the current Trump administration.

We would do much better to deport Stephen Miller.

Tariffs again

“Mr. Trump said that generic-drug manufacturers must move production to America or their products will face a 100% tariff from August 2028. A 200% levy would follow from August 2029.” 

All economists and hopefully you as well understand that your standard of living (income) is higher (much higher) because you can specialize in what you are best at and trade for the rest (exploiting “comparative advantage”). If you had to be totally self-sufficient you would be dirt poor.

Unfortunately, Stephen Miller and Donald Trump don’t understand this or is it just that Trump gets such a kick out of throwing his weight around that he doesn’t care??

Obeying the rules is in our interest

The U.S. Department of Justice indicted former Cuban President Raúl Castro for his alleged role in the 1996 Cuban military downing of two civilian planes operated by the exile group Brothers to the Rescue, which killed four people (including three U.S. citizens).Since September 2, 2025, the U.S. military has attacked suspected drug boats in the Caribbean and the Eastern Pacific 59 times, killing 196 people. Shouldn’t we be indicting Secretary of War, Pete Hegseth, for murder?

“According to President Donald Trump’s mysterious math, that means this campaign of carnage has prevented around 1.5 million drug-related deaths in the United States—more than 20 times the total number recorded in the year before Trump started treating suspected cocaine smugglers as ‘combatants’ who can be killed at will, from a distance and in cold blood.

“Back on planet Earth, there is no reason to think the boat strikes have prevented any deaths at all. That could only happen if blowing up smugglers—as opposed to the previous practice of intercepting them, arresting them, and seizing their cargo, which Trump says was ‘totally ineffective’—reduced the supply of cocaine available to American consumers. Given more than a century of failed attempts to ‘stop the flow’ of illegal intoxicants, that never seemed likely. And nearly nine months after Trump launched his new, deadlier version of the war on drugs, there is no evidence that it is more effective than the traditional tactics he derides as insufficiently homicidal.” Jacob Sullum, “Blowing up boats hasn’t slowed cocaine traffic to U.S.”

Should we care about such a double standard? Yes. What we are doing is not only illegal but also immoral. Hopefully we aspire to behave morally because we aspire to be moral people. But there is a practical self-interest in playing by the rules as well.

We could often get our way simply because we are the strongest guy on the block. President Trump seems to like being a bully. However, pushing others around has a cost. The better we can live up to the high principles upon which our nation was founded, the more respect we will receive from others (nations and people). One of those important principles is adhering to the rule of law. Such respect means that others will cooperate with us more easily (at lower cost to us).

International norms and conventions generally serve the interests of all who have agreed to them. Win, win. When we violate them, the world pays a cost and so do we.

SCOTUS – Louisiana v. Callais

“The Supreme Court’s invalidation of Louisiana’s congressional map has triggered a swirling debate about just how fundamentally the justices altered the Voting Rights Act landscape.” This and following quotes are from The Hill article: the hill – regulating voting-rights-act-supreme-court – SCOTUS-Decision  

The court’s ruling in Louisiana v. Callais was adopted by 6 – 3 of the judges.

I am quite amazed how dramatically differently some people have characterized the decision’s result.

“Section 2 of the Voting Rights Act of 1965 [as Amended in 1982] has enabled groups to force states to draw additional majority-minority districts for decades,” despite the 15th Amendment to US constitution in 1870, which prohibited the federal and state governments from denying a citizen the right to vote based on that citizen’s “race, color, or previous condition of servitude”, effectively protecting the voting rights of Blacks.

Section 2 “bars voting maps that give a racial minority ‘less opportunity than other members of the electorate’ to elect their preferred candidate.”

In Thornburg v. Gingles (1986), the Supreme Court ruled that multi-member legislative districts in North Carolina violated Section 2 of the Voting Rights Act by diluting Black voting power. The landmark ruling established a critical three-part legal test to determine if an electoral map illegally discriminates against minority voters.

To prove a violation of Section 2, plaintiffs must satisfy the following three preconditions:

  1. Numerosity and Compactness: The minority group must be sufficiently large and geographically compact to constitute a voting majority in a single-member district.
  2. Political Cohesion: The minority group must show that it is politically cohesive, meaning they largely vote for the same candidates.
  3. Majority Bloc Voting: The plaintiffs must prove that the white majority votes sufficiently as a bloc to usually defeat the minority group’s preferred candidates

After Thornburg v. Gingles, plaintiffs could prove vote dilution by showing that a minority group was large and compact enough to form a majority in a reasonably drawn district, was politically cohesive, and faced bloc voting by the majority that usually defeated its preferred candidates.

That framework gave civil-rights groups a litigation template: draw an “illustrative” majority-minority district, show polarized voting, and argue that the state had cracked or packed minority voters so they could not elect their preferred candidate. If they won their case, the remedy often required the state to create an additional majority-minority district, even though Section 2 formally says it does not create a right to proportional representation.

In its recent Louisiana v. Callais ruling the Court held that Louisiana’s second majority-Black congressional district was an unconstitutional racial gerrymander and that Section 2 did not require Louisiana to draw it. The Court majority said that Voting Rights Act compliance can be a compelling interest only when Section 2 is properly construed, and it tightened the Gingles test by requiring race-neutral illustrative maps, closer adherence to state districting goals such as compactness, incumbency protection, and partisan objectives, and evidence separating racial bloc voting from ordinary partisan voting.

The practical effect is that plaintiffs can no longer easily say, “Here is a compact majority-minority district; therefore, the state must draw it.” After Callais, they must show that the alternative map satisfies the state’s nonracial redistricting criteria, that the voting polarization is racial rather than merely partisan, and that the totality of circumstances points to present-day legally relevant discrimination rather than mainly historical disadvantage.

A “majority-minority district” is one in which a racial minority (blacks, Asian, Hispanics, etc.) constitute a majority of the voters. The presumption seems to be that, for example, only (or mostly) blacks will vote for a black candidate. That is clearly a racist view. Barack Obama, for example, was elected President of the United States by a majority of white voters.

I am really shocked at how overtly racist the opposition to the court’s decision is. “’Unfortunately, we are talking about rolling back to an era of Jim Crow, and I don’t believe I’m overstating that,’ Sophia Lin Lakin, director of the American Civil Liberties Union’s voting rights project, But Jim Crow laws were used to segregate blacks and whites. Majority-minority districts move in the same direction. The court’s weakening of the arguments for such districts is the opposite of a Jim Crow law. Voters are motivated by many things, but I have more confidence than does Ms. Lakin in voters choosing the candidate they think best and most effectively supports the policies they support, whether the voter is black, white, or yellow whatever the color of the candidate.

“House Minority Leader Hakeem Jeffries (D-N.Y.) said the law was ‘largely gone,’ telling reporters the decision was ‘designed to undermine the ability of communities of color all across this country to elect their candidate of choice.’” Good grief.

Here is an excellent discussion of this issue: “The supreme court’s vote ruling empowers minorities”

Stable Coins

Digitizing our bank deposits (digital dollars—stable coins) would (will) represent another step forward in the ease and efficiency with which we can make payments and will enhance bank stability. Most of the US supply of money (US dollars) is in the form of our dollar deposits at our banks and most of our payments these days are already made by electronically transferring bank deposits from me to you via my bank to yours. I have discussed all of this in more detail earlier: “Econ 101-Money”

Developing the rails for paying with stable coins is a further improvement on our existing payment options. It is not revolutionary. The payment of cash (currency) requires no infrastructure (e.g. Merchant contract with credit card issuer and card reader, etc.). You just hand it over and anyone can accept it (hopefully the person you intended to receive it). The electronic transfer of a bank deposit balance (e.g., Zelle, Venmo, e-wire) requires the enrollment of the recipient in that particular payment vehicle.  It took decades for credit cards to be widely accepted. Hundreds of companies now issue Visa cards (mine is issued by United Airlines) and all are accepted wherever any of them are accepted. But it took a lot of work to build that system.

What do stable coins issued by banks add that might be useful? From the bank side issuing stable coins from deposit balances simplifies the bank’s management of the assets that back them. When its customers withdraw cash these days, the bank must purchase it from the Federal Reserve in order to pass it on to you. It pays the Fed for the cash from its reserve deposits at the Fed, which reduces its ability to extend credit to businesses and households. If its reserves at the Fed are not sufficient, it will need to borrow from another bank or sell another asset.

The withdrawal of cash from bank deposits tends to follow seasonal patters. Thus the squeeze on its reserves at the Fed would tend to create seasonal fluctuations in bank credit hence in the money supply.  Thus the Fed attempts to offset the impact of currency fluctuations on bank reserves and thus credit with offsetting purchases and sales of government securities (so called open market operations) or with temporary loans to banks in its “lender of last resort” function. If a bank can issue its own currency (as they did in the old days) when a customer withdraws cash from its deposits, its asset backing (and reserve deposits at the Fed) will not be affected. Banks will now be able to do this by issuing their own stable coins. While the customer’s deposit balance will fall when withdrawing cash (or stable coins), its total of stable coins “cash” plus deposit balance will not change thus the bank assets backing them do not need to change. Thus, such fluctuations in the currency/deposit ratio would not product a fluctuation in the money supply.

From the customers side the stable coins are as good as traditional cash only to the extent that the infrastructure to accept them (e.g. phone wallets) has been designed and widely acquired/accepted. Just as it took many years for credit cards (Visa, Mastercard and American Express) to be widely adopted, the same will be true with stable coins. Just as you might now swap addresses via your respective mobile phones, you will be able to make payments.

If everyone can issue their own money it degenerates to barter, i.e. it would not be money at all. The essence of a successful means of payment is the certainty of its ultimate claim on the central bank’s official monetary liability (the dollar). When central banks were limited to issuing currency redeemable for “something” such as gold or silver, the amount they issued was limited by their holding of gold or silver, etc.  Today the Fed’s supply of money is limited by Congress’s mandate for price stability and full employment. And ultimately the government must accept such dollars in payment for our tax obligations stated in the same currency.

DEI—a nuanced assessment

DEI — “diversity, equity and inclusion” programs or policies are efforts to promote fairness and full participation of people who have been historically underrepresented or subjected to discrimination. The normal standard of fairness when employing workers is that they are hired (or admitted to college) on the basis of merit—who best satisfied to the requirements for the job. This is what taxpayers who want the best results from their tax dollars, want as well.

Many universities set aside the admission of the best qualified students to reflect the fact that may blacks who might have greater potential than their past performance test score indicated because of racial discrimination should be given preferential treatment. But these “affirmative action” programs where struct down by the Supreme Courts 2023 ruling in Students for Fair Admissions v. Harvard and its companion case against the University of North Carolina, which effectively ended race-based affirmative action in college admissions.

To make room for more blacks, Harvard had raised the bar and thus discriminated against Asian applicants with higher scores. It is appropriate that the standards of equal treatment and merit should be observed for government jobs and public universities.

But private firms and colleges should be able to hire or admit whoever they want. Both firms and colleges may well want the social benefits from greater diversity. Not only can it make the workplace more interesting but the broadened understanding of different racial and religious groups generates greater social harmony as well.

I don’t know what DEI programs generally did or aimed for and am quite willing to believe that they wasted human resources. However, that is quite different from the desirability of properly educating our children about different races and cultures and the history of slavery and harms of racial discrimination. Along with civics, such instruction belongs in elementary school curriculums. Just as the enlightened treatment of gays, blacks, Muslims and other groups in movies and TV shows has led the way toward better understanding, exposure and education are important for building a better and more accepting society.

The government should not interfere in the choices of private firms and university about the composition of their work forces and student bodies.

Econ 101: Budget Cuts

What criteria should guild when to cut some program’s budget? We must first get beyond the fact the any cut will result in having less of something. If it is inefficiency or corruption that we give up—good riddance. But usually, it will be something that has some value. That does not necessarily mean that the cut should not be made.

Consider this example from my in-tray today:

“The Trump administration has made drastic cuts to the National Oceanic and Atmospheric Administration (NOAA) that threaten to impact weather forecasting and other key services provided by the agency. 

In the wake of the wave of dismissals this week, lawmakers and former officials raised concerns about potential damage to services ranging from extreme weather responses to efforts to prevent objects from colliding in space.” “The Hill: Energy – Environment – NOAA cuts”

What should be considered when making such a decision is what other services were prevented by directing these resources to NOAA activities rather than alternative uses. Even if the government just increases it overall budget, the added taxes or borrowing will have alternative uses.

You will immediately understand the issue when you consider your own household budget. Your income is limited (unless you give up some leisure to work more hours). You might gain some pleasure spending more on X, but you can only do so by giving up some Y. If you benefit more from the extra X than you lose giving up Y, then you should do it. It passes the cost/benefit test of maximizing the benefit of your given income.  

In short, the fact that cutting the budget of some agency will cut some of its services is an incomplete argument for not cutting because if fails to take account of the rest of the cost/benefit assessment of the resulting reallocation of resources.

Such budget decisions are generally debated in Congress as it approves the government’s budget. It’s an imperfect process, like most of life, but it allows all views and pros and cons to be heard and considered. A body like Musk’s DOGE might be appropriate for evaluating the efficiency with which services are performed (perhaps proposing better information processing systems) and detecting corruption, but not for evaluating the desirability of such services themselves.

USAID

“When Marco Rubio testified during his confirmation to become Secretary of State, he said that one of the things that frustrated him the most about the U.S. Agency for International Development was that it didn’t ‘brag’ enough to show other countries ‘what the United States is doing to help their societies.’

“The comment followed years of praise from Rubio for the billions of dollars in lifesaving aid that USAID distributed overseas to boost America’s image and counter the influence of rivals such as China.”  “Washington Post: Marco Rubio on USAID”

From my own experience, I agree with Rubio. After retiring from the International Monetary Fund in 2003, I had a contract from USAID from May 2004  – Sept 2005 to help the Central Bank of Iraq establish financial markets important for monetary policy as well as its capacity to formulate and implement monetary policy. Under this contract I reported to and was supervised by the US Treasury. I have also worked closely with USAID banking supervision contractors (BearingPoint and Deloitte) in Afghanistan, Bosnia, Kosovo, and South Sudan, all post conflict countries. They did an outstanding job, and I am sure that I was well worth the money I earned as well.

Quite aside from the insanity of suspending payments and projects in midair, wasting millions of dollars (and lives) in the process, the proper question of our government is whether these projects (or which of these projects) serve American interests and do so more effectively than would alternative uses of the same money. “As Secretary of State Marco Rubio has said, ‘Every dollar we spend, every program we fund, and every policy we pursue must be justified with the answer to three simple questions: Does it make America safer? Does it make America stronger? Does it make America more prosperous?’” “State Department: Implementing the president’s executive order on reevaluating and realigning United States foreign aid”

A proper answer to those three objectives should take a long run perspective. America is safer and more prosperous when the rest of the world (our trading partners) is also more prosperous. We are stronger when we have earned the rest of the world’s respect and cooperation. USAID, by providing humanitarian and development assistance to other countries, gains their respect and gratitude, which promotes their cooperation. When President John F Kennedy established the USAID in 1961 he made this case calling it American soft power. Following Congress’s adoption of the Foreign Assistance Act in September1961, Kennedy consolidated several foreign aid agencies into the USAID in order to improve coordination and efficiency.  It is fair to ask whether this is the most efficient way of packaging these activities and coordinating them with other departments. https://www.youtube.com/watch?v=QLzwsc3XGNA

USAID has missions in over 100 countries. Congress authorizes USAID’s programs in the Foreign Assistance Act, which Congress supplements through directions in annual funding appropriation acts and other legislation. As an official component of U.S. foreign policy, USAID operates subject to the guidance of the president, Secretary of State, and the National Security Council.

Of USAID’s total budget of almost $8 billion in 2001 and $34 billion in fiscal 2024 (less than 1% of total federal budget), one third goes to public health and the rest to disaster relief, and economic and government capacity building. Its programs to treat HIV and malaria have saved millions of lives, largely in Africa, over the last two decades. It played a major role in implementing George W Bush’s “President’s Emergency Plan for AIDS Relief (PEPFAR) which saved over 25M lives globally. “State Department: About US PETFAR” It played an important role in ending smallpox and increasing global literacy.

When I asked several USAID staff what they considered the agency’s greatest successes they sighted South Korea which is now a major US trading partner, and Columbia which has risen from a failed state to a secure middle-income country and a major US trading partner. But we can no longer access the details of these programs as USAID’s website was taken down February 1.   

Those lives saved, plus the technical assistance in governance, infrastructure, and building stronger economies has raised incomes in these countries and their sales to and purchases from the US and other countries abroad (trade). As the U.S. benefits economically from these stronger economics, American citizens are also kept safer.  With stronger economies comes stability for citizens to live peaceful, prosperous lives, turning away from the perils of extremism and increasing security on the ground. Thus, American aid has not only gained respect, good will, and cooperation from the aid recipients but increased trade, income, and security in the US as a result. In a statement made by then U.S. Senator Marco Rubio, he highlighted that six of the United States’ ten largest trading partners had graduated from assistance provided by the U.S. Agency for International Development (USAID). In a 2015 Senate Foreign Relations Committee hearing, for instance, Rubio said USAID “not only is doing what is right, but we are also furthering our national interests.” “Washington Post: Marco Rubio USAID”

The mean average managed foreign assistance disbursed in the fiscal years 2001 to 2024 by USAID was $22.9 billion in inflation adjusted to 2023 dollars; 2023 was an exceptional year because of an extra $16 billion of funds for Ukraine. America’s military budget over this period was almost $850 billion dollars per year. Since 9/11, the United States has spent an estimated $8 trillion on wars and counterterrorism efforts globally. This figure includes direct military operations in Afghanistan, Iraq, Syria, and other countries, as well as related costs like veteran care and interest on borrowed funds to finance the wars. Over 7,000 American servicemen died in these wars and deaths many multiples of that were suffered by our allies and our enemies over that period. Total Defense Department expenditures over this period were $14 trillion compare with USAID’s expenditures of 0.6 trillion with many lives saved and almost none lost. The State Department’s annual budget ranged from $50 to $60 billion over the same period. Soft power is clearly a bargain for the American taxpayers seeking a safer, stronger, more prosperous America. Why does President Trump want to shut it down?

Not all projects have been successful in achieving their objectives. But many claims of waste and corruption are not supported by facts:

“In 2025, the Trump administration accused USAID of ‘wasting massive sums of taxpayer money’ over several decades, including during Trump’s first presidency from 2017 to 2021. The administration highlighted a list of twelve projects, totaling approximately $400 million—less than 1% of USAID’s annual budget—dating back to 2005. Among the examples cited were $1.5 million for LGBT workplace inclusion in Serbia, $2.5 million to build electric vehicle chargers in Vietnam, $6 million for tourism promotion in Egypt, and ‘hundreds of millions of dollars’ (the largest item) purportedly allocated to discourage Afghanistan farmers from growing poppies for opium, which allegedly ended up supporting poppy cultivation and benefiting the Taliban. Fact checkers found that these claims were largely false, ‘highly misleading,’ or wrong.” “Wikipedia: United States Agency for International Development” 

For another example, claims that USAID funded major media organizations like Politico or BBC News were false. Payments were for subscriptions or grants to independent media projects, not direct funding of news operations. 

But neither USAID nor any other government agency is perfect. Some functions should be eliminated and others automated or streamlined and oversight strengthened. But in order to properly review its programs and operations most operations should continue until a broad consensus is achieved on what reforms are desirable how they can must efficiently be executed. For functions that survive: “’The end goal is replacing much of the human workforce with machines,’ said a U.S. official closely watching DOGE activity. ‘Everything that can be machine-automated will be. And the technocrats will replace the bureaucrats.’”  “Washington Post: DOGE Musk goals” These are worthy goals.

This “convinced Democratic lawmakers and financial columnists, who have long promoted the analogy between citizens and consumers, that DOGE could be a good idea. ‘Streamlining government processes and reducing ineffective government spending should not be a partisan issue,’ announced Congressman Jared Moskovitz (D-FL) when he joined the DOGE caucus in December. ‘If Doge can actually unleash digital reform in the US government, and in a non-corrupt manner, that would be an unambiguously good thing,’ Gillian Tett wrote last month in the Financial Times.”   “Speed-up-the-breakdown”

But suddenly suspending programs and payment while undertaking a review is the wrong approach. To take but one example, Trump’s foreign aid freeze is having unintended effects in Latin America, including halting programs aimed at stopping the flow of fentanyl. Trump has vowed to impose tariffs unless Mexico stops the trafficking of fentanyl, a major killer of young adults in the US, but the aid freeze has halted funding that Mexican authorities rely on to destroy clandestine labs, Reuters reported. Countries across Latin America are scrambling to respond to the cuts, which have dealt a blow to humanitarian programs designed to slow migration to the US — which Trump has also promised to crack down on — as well as conservation efforts in Brazil and coca eradication in Peru.

USAID’s budget and the projects it finances generally arise from the recommendations of USAID Missions in the countries it operates in accordance with the development objectives captured by the respective Country Development Cooperation Strategy (CDCS) created in concert with the host government and civil society. Almost two-thirds of its employees are locally employed staff, many from the upper echelons of the political and social classes of that country, which means stronger ties and partnerships for USAID and the host country government political figures. Some of these local staff go on to join the host country government as Members of Parliament, establishing connections between the USG and the host country government that are unmatched in terms of influence. USAID operates with an understanding of the local institutions and culture that is deep and strongly influences the projects it recommends. These recommendations are reviewed and vetted by multiple entities, including USAID regional bureaus, the State Department Office of Foreign Assistance, the Office of Management and Budget, and by the House and Senate Foreign Affairs and Operations Committees.  These oversight tools include USAID answering inquiries sent directly to regional USAID Bureaus by individual members of Congress  and through the Congressional Notification process, where every USAID project and dollar is reviewed through Hill briefings and questioning of USAID officials by Congress for its approval, which has full oversight of their execution, and gives Congress the ability to place “holds” on funding preventing obligations of funds to take place before answering their inquiries.

As with other government agencies USAID’s operations are reviewed by an independent Inspector General. USAID Inspector General Paul Martin was officially fired on February 11, one day after his office issued a critical report warning that nearly $500 million in food was about to go bad due to President Donald Trump’s freeze on the agency. Rather than the announcement coming from Secretary of State Marco Rubio, the current acting director of the USAID, it was announced by the White House Office of Presidential Personnel. Martin’s office published a six-page report the day before that argued that the recent pause on foreign assistance programs and the slashing of USAID staff has prompted ‘risks and challenges’ to the safeguarding and distribution of the $8.2 billion in humanitarian assistance. Among other things confidence in America health aid in many cases was shattered by its sudden suspension thus undermining its benefit to the US.

“One U.S. official credited Rubio with pushing for the 10,000-person agency to keep on the job roughly 600 staffers as essential workers instead of the 290 suggested by some Trump officials.” .”  “Washington Post: Marco Rubio on USAID”  Whether that is the right number or not (i.e. the staff needed to perform the functions that best serve American interests) the sledgehammer being swung by DOGE is not the right, and certainly not the cheapest, approach to determining it.

Conclusion

The government does more than is best for the country and many programs should be ended or reformed. Freezing them in order to undertake a review is the wrong approach. Lasting positive reforms must be a careful consultative process. The debate over a big bang vs a more gradual approach following the collapse of the Soviet Union is illuminating. Anyone who thinks they can work with a “blank slate” is a fool. Such an approach has never been successful.

The USAID has generally been very successful and should not be “shut down.” To date the DOGE approach has done harm to American standing, safety and prosperity and reduced taxpayer safeguards of who their money is spent rather than strengthened them. The USAID website has been removed thus eliminating the transparency of its operation to public scrutiny. The USAID’s Inspector General has been fired thus eliminating independent oversight, though the Supreme Court may overturn this executive action. The overall approach of DOGE to reform with worries about conflicts of interest is doing more harm than good.

Checks and Balances

Americans have flourished under the freedoms and rules of community life provided by a government with limited enumerated powers that are divided between legislative, executive, and judicial branches to provide checks and balances against abuse of power and a civic culture of mutual respect. As a result, America itself has flourished. In 1900 median American income, valued in 2024 dollars was approximately $18,000 and 40% of the population lived in poverty. In 2024 median American income was $80,020 and 11.1% lived in poverty.  

The share of government spending (Federal, state and local) in the US was approximately 5.5% in 1900 and 37.5% in 2024. Following WWII GDP growth rate declined as government spending rose as a share of GDP. During the 34 years from 1950 – 1984 GDP growth averaged 3.5% per annum while over the next 34 years from 1984-2019 average annual growth rate fell to 2.5%. But the lower growth rate also reflects the burden of increased regulation.

The incoming Trump administration is claiming, with good justification, that the slowing of economic growth reflects excessive government spending and regulation. It has assigned Elan Musk and his new Department of Government Efficiency (DOGE) to reduce Federal government spending and counterproductive regulations.

Some government programs violate or at least stretch its powers as enumerated in the Constitution.  Some regulations fail to pass the cost/benefit test and thus reduce incomes. To identify waste and fraud, DOGE employees have been given access to confidential employee and or beneficiary data bases. “Late Friday, a federal judge in Washington declined to block DOGE access to Labor Department data but expressed concern about young DOGE staffers who ‘never had any training with respect to the handling of confidential information’ accessing ‘the medical and financial records of millions of Americans.’ And on Saturday, a federal judge in New York temporarily blocked DOGE staff from accessing sensitive payment systems at the Treasury Department, citing the risk of ‘irreparable harm.’

“After the New York ruling, Musk defended DOGE methods, tweeting that his team had sought to add routine information to outgoing Treasury payments to help spot fraud — “super obvious and necessary changes” that “are being implemented by existing longtime career government employees, not anyone from @DOGE.”   “Washington Post – DOGE and Musk goals”

 I support modernizing administrative systems to improve government employee’s productivity (i.e. reduce the number of employees needed for a task) and I support eliminating functions that exceed government’s enumerated powers or do not serve a clear need that can only be met by government, and I support eliminating regulations that fail cost/benefit criteria. Examining these functions and systems and associated databases are surely part of such a careful determination.  But what if Musk and Trump have other objectives such as driving out or punishing their enemies?

“The Trump administration is giving hints it may ignore a federal judge’s ruling restricting Elon Musk and his associates in DOGE, the Department of Government Efficiency, from accessing the Treasury Department’s critical payment systems. In his decision, U.S. District Judge Paul Engelmayer warned about the ‘disclosure of sensitive and confidential information and the heightened risk that the systems in question will be more vulnerable than before to hacking.’ Vice President JD Vance responded to the ruling by writing on social media that ‘judges aren’t allowed to control the executive’s legitimate power.’ Elon Musk also called for the judge to be impeached.”   “Democracy Now – constitutional crisis Trump admin hints it will ignore judge’s ruling to block Musk from Treasury records”

Trump has been issuing executive orders that ignore Congress’s authority (such as the adoption of tariffs, and impounding congressionally authorized expenditure). A federal judge in Rhode Island, John J. McConnell Jr., has ordered the Trump administration to immediately restore federal funds that were frozen under a controversial directive. This followed evidence that the administration failed to comply with a prior temporary restraining order (TRO) issued in January, which prohibited freezing federal grants and assistance programs. The funding freeze, initiated by a memo from the Office of Management and Budget (OMB), affected programs tied to the Inflation Reduction Act and bipartisan infrastructure law, as well as initiatives like Head Start and health research grants.

While the legality of Trump’s executive actions in these areas is doubtful, its wisdom is totally lacking. Collective (i.e. government) action requires broad consensus which is obtained by public discussion in which all views are aired. Cutting off programs and expenditure in the middle of existing contracts bound to be harmful to those involved and to generate public outrage quite unnecessarily. It’s probably illegal as well as just bad policy.

Each administration has the right to put managers in place who support its programs. But the pure execution of administrative functions is not, or should not be, a partisan matter. In the earlier years of our republic working for the government was often a way of rewording family or party members. The resulting quality of the services performed was often poor.

The Pendleton Civil Service Reform Act, signed into law by President Chester A. Arthur on January 16, 1883, marked a turning point in U.S. federal employment practices. It was enacted to dismantle the corrupt “spoils system,” which awarded government jobs based on political loyalty rather than merit.

  • The act required certain federal positions to be filled through competitive examinations, ensuring that candidates were selected based on their qualifications rather than political connections.
  • It prohibited the firing or demotion of employees for political reasons and banned mandatory political contributions (known as “assessments”) from federal workers.
  • The act established the Civil Service Commission to oversee the implementation of merit-based hiring and enforce its provisions.

Initially, only about 10% of federal jobs were covered, but presidents were allowed to expand its reach. By 1980, over 90% of federal positions fell under its protections. President Trump intends to roll back such protection to make more political appointment. Is this to insure that he can appoint managers committed to the faithful execution of his policies? Why then have many of his cabinet appointments been so unqualified to care out their responsibilities? An even bigger question is why the Republican controlled Congress has silently approved their appointments and why have they remained silent in the face of Trump’s many violation of law?

Kash Patel, Trump’s nominee to head the FBI, has publicly outlined plans to go after individuals he perceives as part of the “deep state,” including journalists, Democrats, and former Trump allies. Trump has asked for the names of all FBI agents who work on the investigation of his violations of the law and he threatens to fire them. This sound more like an administrative coup than putting a strong team in place to “make America Great again.”

To take one example of executive actions that undermine rather than serve America interests, consider his strong support of Israel’s war against Palestinians, which even goes beyond Biden’s “blank check” support for Israel. After his threats to Mexico, Canada, Greenland, and Panama, he now plans to take control of Gaza, displace its two million Palestinian residents, and transform the area into a U.S. owned resort-like destination. In interviews, Trump described Gaza as having the potential to become “the Riviera of the Middle East” and suggested relocating Palestinians to neighboring countries like Jordan and Egypt, citing safety and redevelopment needs. He emphasized that Palestinians would not have a right to return under this plan, claiming they would be resettled in “better housing” elsewhere. Thus, Trump would join Israel’s ethnic cleansing of Palestinians directly.

On February 11, when meeting with Trump at the White House, Jordanian King Abdullah II was told that Jordan risked billions of dollars in U.S. foreign aid that Amman receives every year if he did not back Trump’s Gaza displacement plan and admit millions of displaced Palestinians. Later Trump softened but did not withdraw his threat.

Trump has taken a number of other measures that signal his supporters will be exempt from the law. He pardoned approximately 1,500 people connected with the Jan 6 attack on the capital. “Rod Blagojevich and Eric Adams got off because they played the Trump card. Is that how justice now works in America?  “Trump-Rod Blagojevich-Eric Adams lawfare corruption pardon”

“In a further jaw-dropping move…, Trump issued an Executive Order that suspends the Foreign Corrupt Practices Act (FCPA) for 180 days, giving a greenlight to megabanks on Wall Street and other U.S. corporations to bribe officials in foreign countries to get business deals approved.”  “Trump gives the greenlight to Goldman Sachs and JPMorgan Chase to return to bribing foreign officials”

To express his anger at what he considered disloyalty by former Trump administration officials such as Mike Pompeo, Brian Hook, John Bolton, and Mark Esper, Trump terminated their security protection.

All of these reflect Trump’s willingness to punish those who cross him. This provides a possible explanation for why Republicans have remained silent in the face of Trump’s violations of Congress’s laws and quietly approved unqualified cabinet appointments. They are afraid of his retribution.

So what do we do about DOGE’s freezing projects and payments and accessing confidential data bases. Is it for good or evil?

Checks and balances should be supplemented by independent inspectors and auditors. But Trump recently fired 17 Inspectors General from various federal agencies. All members of DOGE given access to confidential data should receive security clearances. Edward Coristine, a 19-year-old member of Elon Musk’s Department of Government Efficiency (DOGE), launched an image-sharing website called tesla.sexy in 2021. The site featured custom “shitposting” web addresses that redirected to content hosted on his platform. Some of these URLs referenced inappropriate and illegal content, including child sexual abuse material and racist themes.  He was recently appointed as a senior adviser to the State Department’s Bureau of Diplomatic Technology without a security clearance!!!

I am perplexed. I would like DOGE to identify waste and fraud and help reduce the scope of government and make what remains more efficient and effective. Understaffing air traffic control under Biden didn’t work out so well for the 67 people who died when a helicopter crashed into a passenger plane at Reagan National. Proper government functions should be properly performed.  But I do not want it to become a weapon of a thin-skinned bully punishing those who oppose him. Among other things the president should not be able to remove oversight inspectors or otherwise weaken independent scrutiny.