It is this dynamic that makes it hard to believe that Ilon Musk really believed that the reason for Donald Trump’s interest in the Musk-led Department of Government Efficiency (DOGE) was the U.S. president’s sincere desire to save the government money. But he felt betrayed, and the feeling was so strong that he called Trump’s proposedOne Big Beautiful Bill(abbreviated OBBBA) a “disgusting abomination.” This bill is projected to add trillions of dollars to the U.S. federal budget deficit and national debt. Even Steve Bannon, a key architect of Trump’s populist “Make America Great Again” (MAGA) program and Musk’s ideological opponent, has come out with similar criticism of the bill, as have prominent Republican senators including Rand Paul and Ron Johnson.
While Republicans see the drumbeat of austerity policy as a political tool, Democrats are more sincere – or naive – in their appreciation of its merits. Since Ronald Reagan, all Republican presidents have dramatically increased budget deficits: they have cut taxes and increased military spending. In contrast, Democratic administrations have worked to curb the country’s growing debt, mostly by cutting public investment and weakening the social safety net.
Lawrence Summers, who served as Treasury Secretary under President Bill Clinton, was convinced that the economic recovery in the 1990s was due to Clinton’s commitment to a balanced budget. And as director of the National Economic Council under President Barack Obama, Summers successfully advocated the same approach.
After a decade of economic stagnation, President Joe Biden ‘s administration broke with that tradition by trying to bring the U.S. economy out of its pandemic numbness with massive fiscal stimulus. Summers led a media campaign against the policy, warning of a spike in inflation. But Biden held his ground, and although inflation briefly spiked, there was no catastrophe because the U.S. has a unique ability to run up budget deficits by relying on the dollar’s central role in the global financial system. Once again in the last half century, America has managed to sustain a higher level of debt than many had expected.
When Biden dropped out of the 2024 presidential race, the nomination of Kamala Harris, his vice presidential running mate, as the top Democratic candidate signaled a possible return to the economic policy orientation of the Clinton and Obama eras. But Harris lost, leaving America – and the world – with Trump, the self-proclaimed “king of debt.”
Yes, any government has limits in financing budget deficits. Former British Prime Minister Liz Truss learned this the hard way in 2022, when her government’s proposed “mini-budget” caused her borrowing costs to skyrocket, leading to the immediate end of her premiership. But Trump is in no danger of a Trump-style incident. The dollar is far more important to the global economy than the pound sterling. And the Federal Reserve’s willingness to provide liquidity to the Treasury bond market (in cooperation with foreign central banks and Treasuries) reinforces the status of the dollar, which, like some banks, is “too big to fail.”
And the recent decision by Moody’s to downgrade the U.S. sovereign credit rating is very important here. If rampant borrowing, coupled with endless uncertainty over duties, exacerbates inflation and slows the economy, more downgrades will follow, and that will make it more expensive for the U.S. government to finance its debt. This will be negative for America, but it is not an existential threat, which means that the Democrats’ calls for fiscal prudence will not resonate with Republicans.
The U.S., of course, is not alone. In Europe and elsewhere, the government’s choice of socialism for the rich and austerity for the rest of us has fueled the rise of populist movements similar to MAGA. But the fact that so many prominent Republicans oppose Trump’s spending bill reflects a void in the ideological core. And that’s what unites MAGA with other right-wing populist movements. A disparate set of strong grievances is not easy to turn into a coherent economic strategy.
Martijn Conings
is a professor of political economy and social theory at the University of Sydney,
author of a new book, TheFinancial Bailout State: Why Governments Save Banks, Not People(Polity Publishing, 2025).
© Project Syndicate, 2025.
www.project-syndicate.org
