{"id":5543,"date":"2025-06-27T16:56:45","date_gmt":"2025-06-27T09:56:45","guid":{"rendered":"https:\/\/viet-futures.com\/?p=5543"},"modified":"2025-06-30T14:44:17","modified_gmt":"2025-06-30T07:44:17","slug":"chinh-sach-doi-noi-duoi-lang-kinh-bai-binh-luan-straits-financial-thang-2-2025","status":"publish","type":"post","link":"https:\/\/viet-futures.com\/en\/chinh-sach-doi-noi-duoi-lang-kinh-bai-binh-luan-straits-financial-thang-2-2025\/","title":{"rendered":"Domestic policy through the lens of the Straits Financial commentary \u2013 February 2025"},"content":{"rendered":"
Introduction<\/h2>\n\n\n\n
While the foreign trade sector of the Trump administration continuously faced legal obstacles and strong reactions from the international market, the implementation of domestic policies has been relatively smooth. Thanks to the unified power in both the Senate and the House of Representatives under Republican leadership, many executive orders on immigration, healthcare, and domestic finance have been issued swiftly. However, these initial steps have only touched the 'tip of the iceberg' compared to the core challenges: federal deficit, control of illegal immigration, and rising financial costs.<\/p>\n\n\n\n
1. Difficulties in reducing the budget deficit<\/h2>\n\n\n\n
**Deficit scale**: The US federal budget is currently recording a deficit of over 1.4 trillion USD in the fiscal year 2024, raising concerns about the sustainability of public debt and pressure on government bond yields.<\/p>\n\n\n\n
**Unrealistic Goals**: At least three major commitments\u2014reducing the deficit, curbing illegal migration for work, and lowering bond yields\u2014require close coordination between the Treasury Department, the Federal Reserve (Fed), and Congress. However, the Fed operates independently, and it is difficult for Congress to reach consensus on simultaneous cuts to spending and tax increases.<\/p>\n\n\n\n
In-depth analysis: Reducing the budget deficit must be based on two directions: increasing budget revenues (through tax reforms) and reducing expenditures (by cutting programs). While the Trump administration lowered the corporate tax rate to 21%, resulting in a revenue loss of 170 billion USD per year, the proposals to 'cut 1 trillion USD' lack a specific roadmap, and the ability to negotiate with the Democratic Congress remains a significant barrier. The lack of coordinated design between the Fed and the Treasury further makes the goal of lowering bond yields non-viable.<\/p>\n\n\n\n
2. Immigration decree: Effective or formal?<\/h2>\n\n\n\n
**Executive Order**: From orders to increase biometric tracing to order to restrict refugees at the border, the administration has issued a series of directives to \"squeeze\" illegal migration.<\/p>\n\n\n\n
**Legal challenges**: Democratic-leaning states like California and New York quickly filed lawsuits, leading to a pause on some provisions.<\/p>\n\n\n\n
In-depth analysis: Except for easily implementable changes (such as increasing border security personnel), extensive measures\u2014like building a new border wall or deporting 12 million undocumented immigrants\u2014face obstacles from federal courts. The lack of a clear budget to cover personnel and infrastructure, as well as the immigration vetting process, may significantly limit actual enforcement effectiveness.<\/p>\n\n\n\n
3. The initiative to 'Muskify' the apparatus: DEI, USAID and the budget story<\/h2>\n\n\n\n<\/figure>\n\n\n\n
In the past two weeks, Elon Musk unexpectedly announced his intention to abolish several federal agencies, including:<\/p>\n\n\n\n
\u2013 Office of Diversity, Equity, and Inclusion (DEI)<\/p>\n\n\n\n
- United States Agency for International Development (USAID)<\/p>\n\n\n\n
The total spending for these two agencies is only a few tens of billions of USD\u2014less than 5% of the goal of cutting 1,000 billion USD annually that Musk proposed. As we approach the 'tip of the iceberg', such as the Department of Education (268.4 billion USD) or the Department of Health (including Medicaid and ACA, amounting to hundreds of billions of USD), the social impact and public reaction will be much more intense.<\/p>\n\n\n\n
In-depth analysis:<\/p>\n\n\n\n
\u2013 **Ministry of Education**: For the fiscal year 2024, a budget of 268.4 billion USD (of which 160.7 billion for student support) directly assists more than 30 million students with loans and many disability programs. The cuts mean that millions of low to middle-income families will incur more debt, reducing access to higher education.<\/p>\n\n\n\n
- **Healthcare (Medicaid & ACA)**: The ACA has expanded coverage for 20 million people, with a budget of about 100 billion USD per year. Cuts will push direct costs towards doctors and hospitals, putting significant pressure on low-income groups - which had previously justified maintaining this program.<\/p>\n\n\n\n
4. Political and economic consequences<\/h2>\n\n\n\n<\/figure>\n\n\n\n
1. **Public reaction**: Recent polls show that the disapproval rating of Trump increased from 41.5% to 44.4% in the first 16 days after taking office, while approval dropped from 49.7% to 49%\u2014a sign that the administration has little \"room\" to experiment with bold reform measures.<\/p>\n\n\n\n
2. **Consumption and Growth**: Reducing social spending can decrease domestic demand, leading to lower GDP growth of 2-3% per year than expected, directly affecting budget revenue and exacerbating the budget deficit.<\/p>\n\n\n\n
3. **Future policy**: With the upcoming midterm elections (November 2026), the Republican Party will have to weigh long-term benefits (reducing public debt) against the need to maintain a majority in Congress. \"Rescuing\" the budget through significant cuts to social welfare programs could come at the cost of immediate political loss.<\/p>\n\n\n\n
Conclusion<\/h2>\n\n\n\n
Despite a smooth start thanks to a solid majority in Congress, the Trump administration's domestic policy is facing a strategic crossroads: to continue 'skimming the surface' on small spending programs, or to confront directly large expenditures such as education and healthcare\u2014where the latter choice would have far-reaching economic and social ramifications. Pressure from the courts, public opinion, and the realities of the budget forces Washington to consider the balance between reform ambitions and implementation capacity, lest it risk losing voter trust and undermining economic growth.<\/p>","protected":false},"excerpt":{"rendered":"
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