Donald Trump’s career is littered with the wreckage of small contractors he has stiffed after they did legitimate, good faith work for him.
Donald Trump wants the US government to violate contracts as freely as he has always done over his career. In particular so far, the reneging has centered on obligations of the US AID program, and the IRA, the centerpiece of Joe Biden’s climate action and infrastructure building.
The difference is that Trump has paid no price for swindling others over the years. If the Faith and Credit of the US government is compromised, we will all pay a huge price going forward.
The Trump administration’s dismantling of the U.S. Agency for International Development is stiffing American businesses on hundreds of millions of dollars in unpaid bills for work that has already been done, according to a lawsuit filed Tuesday.
The administration’s abrupt freeze on foreign aid also is forcing mass layoffs by U.S. suppliers and contractors for USAID, including 750 furloughs at one company, Washington-based Chemonics International, the lawsuit says.
“One cannot overstate the impact of that unlawful course of conduct: on businesses large and small forced to shut down their programs and let employees go; on hungry children across the globe who will go without; on populations around the world facing deadly disease; and on our constitutional order,” the U.S. businesses and organizations said.
An organization representing 170 small U.S. businesses, major suppliers, an American Jewish group aiding displaced people abroad, the American Bar Association and others joined the court challenge.
These skirmishes will have economic consequences — and while these might be small in the context of America’s $29 trillion economy, they will gradually deepen. By refusing to honor its contracts, the Trump administration is forcing private companies to bear public costs. Those companies will delay hiring employees and investing in new equipment as they await repayment; some will furlough workers and go bankrupt. The burden will become more and more significant every day that the Trump administration continues its spending freeze.
These costs will not be randomly distributed through the economy, but rather concentrated primarily in sectors located in rural areas and affecting working-class Americans. Professional environmentalists in Seattle will continue to have a job regardless of what happens to some rural school district’s microgrid project. But the construction workers and electricians set to build that grid will lose income.
For this reason, the energy and infrastructure freeze does not strike me as a very wise move, politically — particularly as U.S. economic sentiment is worsening. One reason it is politically prudent for lawmakers, and not the president, to make spending decisions is that representatives understand their districts much better than federal officials in Washington, D.C.
This suggests the final takeaway: The Trump administration is beginning to play a very dangerous game with the United States. The American economy’s strength and prosperity arises from its territorial resource wealth, its educated and productive workforce, its secure defensive position, and — crucially — a set of financial intangibles that are ultimately backed up by federal contracts. The federal government is the largest counterparty in the global economy because it can be relied upon to pay its debts. If it begins to back out of contracts hither and thither, especially if primarily for partisan political reasons, then it will ultimately damage every American.
Atlantic City is built on a barrier island (like Miami Beach and Galveston). How much money will be wasted vainly trying to protect such cities from the sea?