Compared to foreign trade policy, Trump’s domestic policy implementation is currently proceeding more smoothly, largely because the Republican Party controls both the Senate and the House of Representatives. As a result, while immigration-related executive orders may face legal challenges in Democratic-led states, the overall policy process remains relatively stable. However, Trump’s domestic policies have yet to address the most difficult issues, such as significantly reducing the federal budget deficit, effectively deporting illegal immigrants, and finding ways to lower US government bond yields to lower the government’s financial costs.
In the past two weeks, Elon Musk has made multiple public appearances and announced a series of architectural initiatives, including the elimination of government agencies such as the banned departments of Diversity, Equity, and Inclusion (DEI) and the U.S. Agency for International Development (USAID). These moves are unlikely to negatively impact the lives of average Americans, at least in the short term, thus there is no significant risk of public backlash. However, this mechanism does not actually cost too much of the federal budget, with total spending only in the range of a few billion USD – still a long way from the goal of cutting 1 trillion USD in spending each year that Musk proposed.
If Trump or Musk continue to push their agendas, budget cuts to larger, more important projects will inevitably impact the incomes and well-being of Americans, leading to growing opposition. Musk, for example, has suggested that he is considering dismantling the U.S. Department of Education—a move that would have a much larger impact on ordinary citizens and the economy than eliminating DEI or USAID.
In fiscal year 2024, the U.S. Department of Education’s total spending will reach $268.4 billion, of which $160.7 billion will be allocated to the Office of Federal Student Aid. Since 2020, this increased funding has helped provide financial assistance to many lower- and middle-class American families with student loans and helped many low-income students cover rising tuition costs. If these aid programs were cut, many lower- and middle-class American families would face significant financial strain.
In addition, a large portion of the Department of Education's budget is also used to fund important scientific research and support educational programs for people with physical and intellectual disabilities in the United States.
Furthermore, Trump’s plan to reform the US health care system, including Medicaid and the Affordable Care Act (ACA), could trigger widespread discontent. The Trump administration has previously announced its intention to begin cutting federal health spending and restricting or even eliminating the ACA – a program established under President Obama – in the next fiscal year. The plan would force Americans to pay more for health care through private insurance, while the savings would be used to finance the tax cuts that Trump has promised. However, according to current polling data, a majority of voters, including Democrats and Republicans, oppose this policy change.
The core problem is that increasingly deep spending cuts not only increase discontent among those directly affected, but could also lead to a decline in consumer spending and economic growth in the US, ultimately undermining support for the Trump administration.
According to data from a US polling website, Trump's disapproval rate increased from 41.5% to 44.4% in the first 16 days after taking office, while his approval rate decreased from 49.7% to 49% (Figure 5). This shows that the Trump administration has little room to make big mistakes when implementing strong reform policies.
Of course, it is still too early to make a definitive assessment of the success or failure of Trump’s domestic and foreign policies. However, it is reasonable to conclude that the challenges and pressures facing the Trump administration, both at home and abroad, will certainly continue to increase in the future.
*This article is a summary translation from “Straits Financial Chief Economist Commentary – February 2025”
