Edward Lotterman

Our nation is in the middle of a coup d’état, a civilian one rather than military, but a classic coup nevertheless. An ill-defined but powerful group of people, most with no legal standing but with ample private funding, is making drastic changes in our nation’s polities and governing structures. Many of these changes violate existing laws and some our U.S. Constitution, but no one seems to have the means to stop this.

As is often the case in non-military coups, it is our elected president himself together with the shadowy “gray eminence” of Elon Musk who are most scornful of the law.  Moreover, as is often true in such coups, many in the president’s own party are dismayed by the course of events. Yet few dare to speak out. Some fear losing current or future positions. Some may see a “greater good” they hope this administration will bring in other areas, whether on social issues or simply lower taxes.

Opponents were caught unorganized and unprepared for a stunning initial torrent of actions, firings of workers, cancellations of programs and abolition of organizations established by Congress over many decades. Some are organizing legal challenges, but the new administration may take a leaf out of President Andrew Jackson’s book and defy court orders up to the U.S. Supreme Court itself.

Many committed Republicans understand that the historical GOP, that of Abraham Lincoln, Theodore Roosevelt, Dwight Eisenhower, Richard Nixon and Ronald Reagan, is near death. They could save the party they loved by speaking forcefully now, but the silence is deafening.

Concerned members of the general public should express themselves however possible.

In the meantime, there are salient economic issues that need better understanding.

Federal civilian employment is not a major factor in federal spending and deficits.

For decades, demagogues have lied to the public by asserting that federal budget deficits are caused by “waste and abuse,” and that burgeoning federal employment is a major cause. Firing large numbers of civil servants is a supposed remedy. No, it isn’t.

First of all, the number of civilian federal employees, about 2.3 million, not including postal workers, has been roughly level for the past 60 years. It stood at 2.1 million in 1966 when the U.S. population was 197 million versus 335 million now. Back then, federal workers made up 3.1% of the nation’s total labor force. Now, they are 1.5%.

Secondly, while the cost of civil service pay is not negligible, it remains a relatively small fraction of total federal outlays. The money simply isn’t there to close our deficits.

From the mid-1950s, after the Korean War had ended, to the mid-1970s, civil service compensation averaged around 14% of federal spending. However, this ebbed steadily as time went on. As an average share of federal outlays, it has been flat at about 7% for the last 20 years. It was only 5.9% in 2023. With the projected budget deficit for fiscal year 2025 at 26% of total outlays, you could fire every federal worker and still be borrowing $1 out of every $5 spent.

Non-military foreign aid is not a major factor in federal spending and deficits.

Non-military foreign aid to other nations is highly misunderstood and subject to much demagogy. Surveys repeatedly show that the general public believes it accounts for a quarter of all federal spending. When asked what fraction would be justified, the responses are about 10%.

The reality is that at recent levels, outside of aid to Ukraine in fiscal years 2023 and 2024, our foreign aid spending is about $60 billion a year. The U.S. Agency for International Development manages about $38 billion while the Department of State directly manages about $18 billion. The rest is through the Department of Agriculture and other agencies. The total of about $60 billion is eight-tenths of 1 percent of total federal spending and two-tenths of 1 percent of gross domestic product.

To put things in perspective, $60 billion is just below the amount that the prior Trump administration paid to about 400,000 farmers to compensate them for anticipated collateral damage in its trade war with China.

Or, for another perspective, understand that Social Security payments to retirees and survivors, but not the disabled, are 21 times as great as foreign aid. Aid merits a column of its own, but wiping it out entirely would close 3.1% of the deficit.

International trade is not a zero-sum game.

Nearly 250 years ago, Adam Smith and other economists showed how both nations engaging in uncoerced trade benefit. The fact that one nation exports more goods or services to another country that it imports from them is no sign of harm. But President Donald Trump refuses to understand this simple truth. He sees trade imbalances as exploitation. Referring to U.S.-Canada trade flows, he said “because we lose $200 billion a year with Canada. And I’m not going to let that happen. It’s too much. Why are we paying $200 billion a year essentially in subsidy to Canada?”

We are not subsidizing Canada any more than Brazil and Peru subsidize us by importing more from our nation than they export to us. Nor are we “subsidizing” Canada any more than we subsidize a gas station when we fuel our vehicles. Yes, Canada sold about $64 billion more to U.S. buyers than Canadian importers bought here. But how is that a problem?

Since we import about 4 million barrels of crude oil from Canada every day for a total value of about $100 billion a year, Canada could stop “exploiting” us by simply selling their crude oil elsewhere. Would we be better off? How and why?

A U.S. “sovereign wealth fund” might be a joke or an enormous theft.

Trump has called for establishing a “sovereign wealth fund” for our nation. It would hold invested assets and use earnings to pay for new programs or make payments to citizens. Alaska and Norway have such funds that receive money from sales of petroleum. When Trump made this call a week ago, a review of 10 news articles showed that only one addressed the key question: From where would the money come?

All governments with such funds have no national or state debt. Our nation has a large national debt that is growing rapidly. Establishing a sovereign wealth fund at this point would be like a family taking on an additional $500,000 in debt through a mortgage re-fi and then purchasing a $100 Series EE savings bond every month. On its face, the idea is ludicrous.

Yet it is not to some multibillionaires in the president’s retinue. Only one news article reviewed captured the key detail: “We will take assets the country already has, monetize them, (and) put that money in the fund to be placed in high yielding investments,” Treasury Secretary Scott Bessent said.

Understand that “monetizing” assets we already have would means selling off national forests, mineral and oil rights on other federal lands, hydroelectric dams on the Columbia, Missouri and Tennessee rivers and perhaps even locks and dams on our internal waterway system. And who would be better buyers than the 26 billionaires, in addition to Musk, Jeff Bezos and Tim Cook, who gave over $1 million to the Trump campaign?

The ”high yielding investments” would be cryptocurrencies like Bitcoin or high-flying hedge funds that have money in other funds that own funds. The potential is for the American people to be cheated both coming and going.

Much more could be said about the actual and pending policy initiatives of the new administration, but sufficient unto the week is the evil thereof.

St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.