Trump’s Federal Freeze – Shrinking the Public Sector

January 30, 2025 by Martin Armstrong

President Donald Trump implemented a widespread freeze on federal loans and grants, ordering all agencies this week to “temporarily pause all activities related to obligation or disbursement of all Federal financial assistance.” He was forced to back off after a federal judge halted some of the freeze. The public sector has been multiplying in recent years to the point that there are thousands of agencies whose true purpose are unknown. While many view the act as extreme, public sector growth has become detrimental to our economy and one must determine what exactly the government is funding.

As Adam Smith wrote in “Wealth of Nations”:

“Like an improvident spendthrift, whose pressing occasions will not allow him to wait for the regular payment of his revenue, the state is in the constant practice of borrowing of its own factors and agents, and of paying interest for the use of its own money.”

The wealth of a nation is composed of more than money or gold, for the original idea of “money” did not embrace the concept of true wealth. Money is merely our mental measure of wealth. Cultures in different parts of the world all conceive of money but it is merely how they measure this universal concept of wealth.

There is only one constant and that is the greater the size of government, the lower the production of national wealth. Therefore, the higher the percentage of a nation’s work force is employed by the public sector, the lower its real national product. We saw this in Argentina as of late. Of course, government wishes to include itself in the GDP calculation and it counts government workers twice in many countries. It adds total government spending and adds that to total personal income. By doing this they count all government employees twice for they do not back it out of the total government spending. So we have bogus statistics in GDP as well for the economy appears better when government hires rather than the public sector. That is why we will see unemployment rise under Trump but in all actuality that figure will not be indicative of the overall health of our economy.

Now, Trump specifically is asking for more information on 2,600 programs to determine their legitimacy. Biden implemented a slew of DEI iniatives and programs that do nothing but TAKE from our economy. The Office of Management and Budget (OMB) sent the aforementioned companies the following questions:

• Does this program provide funding that is implicated by the directive to end discriminatory programs, including illegal DEI and “diversity, equity, inclusion, and accessibility” (DEIA) mandates, policies, programs, preferences, and activities, under whatever name they appear, or other directives in the same EO, including those related to “environmental justice” programs or “equity-related” grants?

• Does this program promote gender ideology?

• Does this program promote or support in any way abortion or other related activities identified in the Hyde Amendment?

“It means no more funding for the green new scam that has cost American taxpayers tens of billions of dollars,” White House press secretary Karoline Leavitt said Tuesday at her first news briefing. “It means no more funding for transgenderism and wokeness across our federal bureaucracy and agencies.” The new press secretary, who actually responds to questions, said it is “the responsibility of this president and this administration to be good stewards of taxpayer dollars.” Welfare aid programs are not vanishing, rather, the government is reevaluating its spending to best direct dollars.

Organizations promoting woke gender ideology, DEI, and the green new deal will be the first to go but a significant cut is needed to restore some order. The fear mongering about Trump eliminating Medicaid and food assistance programs are unfounded. The new administration must determine what agencies are legitimate and eliminating services that do not add to our society in any meaningful way is the first step.

Argentina is an excellent example of how quickly an economy can recover when we remove socialistic programs. There were 341,477 people in the public sector on government payroll when President Milei took office, and his aim is to eliminate 70,000 needless positions. From December 2023 to October 2024, Argentina reduced the national administration was reduced by 10% and state-run firms decreased by 12.6%. Reducing the national administration alone saved the government $3.82 billion in the short-term, not accounting for future payouts, additional staffing, or pensions. Yet he began by eliminating services that were simply unnecessary.

Milei first eliminated useless agencies such as the Ministry of Culture, Ministry of Health, Ministry of Labor, and Ministry of Social Development. In his words, Argentina WAS a poor country that could not afford these departments that do absolutely nothing to improve the nation’s economic conditions. No one noticed when he reduced the cabinet by 50%, but the economy certainly took note and posted its first budget surplus in 123 years this December.

“The deficit was the root of all our evils — without it, there’s no debt, no emission, no inflation. Today, we have a sustained fiscal surplus, free of default, for the first time in 123 years. This historic achievement came from the greatest adjustment in history and reducing monetary emission to zero. A year ago, a degenerate printed 13% of GDP to win an election, fueling inflation. Today, monetary emission is a thing of the past,” Milei proudly announced.

Yes, other factors contributed to Argentina’s recent success, but moving away from socialism and ever-growing social programs was paramount. Socialism NEVER works but world leaders refuse to learn from the past.

Under Biden, we saw manufacturing flee the US. The jobs reports often looked promising but they failed to recognize the rising public sector that can never contribute to GDP. We have seen what happens when governments grow to disproportionate figures and it never ends well. The longest reigning empire, the Roman Empire, fell as a direct result of an oversized public sector that bankrupted Rome. The private sector produces economic growth, while government is a public servant consuming the wealth generated by others.

The Deep State is more than a swamp; it is an ocean. It is so deeply rooted that I wish Trump all the best, but I am not sure he will be able to root out the core corruption. That will probably take a sovereign default, and history warns that a revolution will often follow. This time, the government is entrenched in bribing the people to retain power, giving them free food and circuses, and they will be the government alone, as they used to say in Rome.