Can DOGEs Fix Fiscal Crises? | This Week's Economy Ep. 101
Tackling spending cuts, state DOGEs, tariffs, jobs report, and more.
Hello Friends!
The U.S. House has passed its reconciliation plan, and this time, the “one, big, beautiful bill” (which the sausage-making will take time) looks to cut taxes and slow federal spending, but let’s wait to see the final result. It’s great to see the new Trump administration, and many in Congress are finally discussing the largest national threat: the federal spending crisis. It’s also encouraging to see Texas, Louisiana, Kansas, South Carolina, and other states follow suit with different forms of Trump’s Department of Government Efficiency (DOGE).
In this episode—and the show notes below—we’ll explore the spending plan details, Texas’s school choice bills, the upcoming U.S. jobs report, tariffs on Canada and Mexico, and more. Tune in on YouTube, Apple Podcast, or Spotify, and visit my website for more information.
1. INFLUENCE OF FEDERAL SPENDING ON STATES AND MEDICAID
In the News:
The federal budget deadline is fast approaching. Last week, the House passed a reconciliation plan to cut taxes by up to $4.5 trillion and reduce spending by $2 trillion, including cuts to mandatory programs like Medicaid. A new report by the Rockefeller Institute of Government reveals the disparity between federal spending in states and the taxes residents pay. It shows that federal funding from taxpayers is concentrated in programs like Medicaid and SNAP. Sources: US News & World Report and USA Today
My Take:
Cut Federal Spending: It's time to address our nation’s out-of-control federal spending. This overspending fuels inflation as Washington’s fiscal policies force the Federal Reserve to expand its balance sheet to attempt to keep interest rates lower than otherwise, directly impacting Americans' wallets.
State Dependency on Federal Funds: Even fiscally conservative states rely heavily on federal funding, with Medicaid accounting for $616 billion in federal spending in 2023—over half of all federal funds sent to states. States that expanded Medicaid with temporary federal funds will face tough choices when Washington pulls back: raise taxes, cut services, or both, ultimately burdening families. This pattern is also seen in federally supported education and transportation spending. The more states depend on Washington, the less control they have over their own policies.
Put Responsibility on States: States should take responsibility for welfare reform, creating safety nets that support people in need without trapping them in dependence. If the federal government continues funding welfare, states should push for block grants rather than federal mandates. Block grants would allow states to tailor welfare policies to their unique economic conditions, avoiding the one-size-fits-all approach that often creates perverse incentives.
Related: My piece at American Institute for Economic Research’s The Daily Economy.
2. JOBS REPORT PREDICTIONS
In the News:
As we await the release of the U.S. jobs report later this week, a San Francisco Fed report predicts that the U.S. central bank will respond "strongly and systematically" to inflation and labor market changes. Source: Reuters
My Take:
Monetary Policy Overhaul: Years of reckless fiscal and monetary policies have eroded the purchasing power of American families. The Federal Reserve’s balance sheet is still 75% larger than pre-pandemic levels, distorting markets and fueling inflation.
Get Americans Back to Work: President Trump should push for a rules-based monetary policy focused on price stability and minimizing arbitrary Fed interventions. He should also support policies that reduce the regulatory burden on businesses to help get more Americans back to work.
Long-Term Focus: The Federal Reserve's primary responsibility is maintaining price stability. They must prioritize long-term solutions that preserve the dollar's value and protect economic freedom through a rules-based approach.
Related: Don’t miss my interview with Dr. Alex Salter as we discuss monetary rules and more!
3. TEXAS HOUSE CREATES A DOGE
In the News:
The Texas House of Representatives has established its own Delivery of Government Efficiency (DOGE) Committee, with goals similar to Elon Musk’s Department of Government Efficiency. Sources: KXAN
My Take:
Seize the Opportunity: The Texas House DOGE Committee has a unique chance to implement lasting reforms. Just as Trump and Congress are working to make workforce reductions at the federal level permanent, Texas should do the same.
Government Jobs Don’t Create Wealth: Texas state and local governments employ about 1.9 million people, funded by tax dollars from the private sector. The government must serve the people and not act as a jobs program. Positions should be evaluated, and those deemed unnecessary should be eliminated. We need a shift to a smaller, more efficient government that allows the free market to drive growth.
Make Permanent Cuts: The DOGE Committee must push for strict efficiency audits, ensuring that voluntary resignations from unnecessary positions lead to real, lasting reductions, not simply rehires in the future.
Related: I shared my thoughts on TV recently about the DOGE! And see my commentary on X about what could be done to eliminate fraud, waste, and abuse and reduce government employment and spending.
4. TARIFFS ON CANADA AND MEXICO SET TO PROCEED
In the News:
Trump announced that 25% tariffs on imports from Canada and Mexico would proceed as planned this week. Both countries have stated they will retaliate with reciprocal tariffs. Sources: CNBC and Politico
My Take:
The Harm of Past Tariffs: History shows that tariffs hurt Americans. The 1930 Smoot-Hawley Tariff Act triggered a global trade war and worsened the Great Depression. Trump’s 2018-2019 tariffs on China raised consumer costs, hurt U.S. manufacturers reliant on imports, and led to costly retaliatory tariffs on U.S. farmers. Tariffs continued under the Biden administration, increasing costs for businesses and consumers.
Flawed Logic: Tariffs do not create jobs. Protectionist policies often backfire, leading to job losses in industries dependent on imports. They don’t benefit consumers—tariffs act as a hidden tax, raising prices for goods with tariffs. And they don’t strengthen the economy—tariffs distort markets, increase production costs, and erode U.S. competitiveness.
Unmet Goals: To counter China, we need policies that promote U.S. innovation and reduce regulatory burdens—not price hikes on American businesses and people. If the goal is to bring back manufacturing, fiscal and regulatory reforms are needed, not costly import taxes. To boost the economy, we should focus on free trade and pro-growth policies, not government-imposed barriers that hurt consumers.
Related: Did you miss this episode below? Watch it today. Check out my latest article in the DC Journal on the costs of tariffs.
5. SCHOOL CHOICE “TEXAS TWO-STEP”
In the News:
School choice legislation has passed the Texas Senate, and the House has proposed two bills—HB 2 and HB 3—marketed as the "Texas Two-Step" for education reform. However, this approach misses the mark. Sources: KWTX
My Take:
Limits on School Choice & Tax Cuts: The package allocates billions to the failing public education system while limiting school choice and property tax relief. Public education gets $8 billion, compared to just $1 billion for school choice and $3 billion for property tax relief.
Making School Choice Harder: HB 2 directly undermines two of Texas’ biggest priorities. It limits Texas’ ability to make school choice truly universal so every student can get an ESA who wants one and hinders efforts to reduce a large tax burden on families—school district M&O property taxes.
Modernize Education: Texas should transition to a universal ESA system instead of expanding a broken school finance model. This could save taxpayers $20 billion annually, empower parents, and significantly reduce property taxes.
Related: Read my latest article on X about the challenges with the Texas House’s “Texas Two-Step.”
6. RENEWABLE ENERGY
In the News:
In 2024, renewable energy production hit a new record, accounting for 24% of U.S. electricity. Texas is leading the U.S. in renewable energy generation and battery capacity, with nearly 80% more combined solar, wind, and battery capacity installed than the second-largest state. Sources: USA Today and Reuters
My Take:
Texas as Energy Leader: Texas is a national leader in renewable energy, especially from wind and solar, but natural gas remains essential for reliable power. The state also has strong potential to expand nuclear energy, creating a diverse energy mix driven by the free market.
Make Energy Great Again: Energy independence was a key achievement of Trump’s first term and must be central to his second. Undoing Biden’s anti-energy policies—such as reopening federal lands and offshore areas for oil and gas exploration and streamlining energy infrastructure permits—will ensure affordable energy for American families and businesses. Texas must leverage market forces to support the development of new power plants, including nuclear.
Restore U.S. Energy Dominance: Reducing regulatory hurdles for domestic energy production will fuel economic growth and strengthen America’s global position by reducing dependence on foreign energy. Restoring U.S. energy dominance is both a financial and national security priority. By removing barriers to investment, Texas can ensure a prosperous future for its energy sector.
Related: We need more energy abundance by getting the government out of the way! Don’t miss this Let People Prosper episode with.
Thanks for joining me in this episode of "This Week's Economy." For more insights, visit vanceginn.com and get even greater value with a paid subscription to my Substack newsletter at vanceginn.substack.com.
God bless you, and let people prosper!
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