Trump Admin Plans to Cut 80,000 Veterans Affairs Employees

Good evening. Here's your Wednesday update.

Trump Delays Tariffs for Automakers for a Month

The White House said Wednesday that is granting U.S. automakers a 30-day reprieve from the 25% tariffs imposed on goods imported from Mexico and Canada.

The new tariffs threaten automakers with a sharp increase in the cost of their products, which may cross the borders with Canada and Mexico multiple times during the manufacturing and assembly process. The announcement came after President Donald Trump spoke with leaders of the major American vehicle manufacturers, Ford, General Motors and Stellantis.

In a statement read by White House Press Secretary Karoline Leavitt, Trump said, "We are going to give a one-month exemption on any autos coming through USMCA," a reference to the free trade agreement Trump reached with Mexico and Canada during his first term. Trump added that the delay comes "at the request of the companies associated with USMCA" and is being provided "so they are not at an economic disadvantage."

More exemptions ahead? Leavitt said the president is "open" to considering exemptions for other sectors of the economy - a comment that helped send stocks sharply higher as investors speculated that the burgeoning trade war might be less painful than feared. But she added that a new set of "reciprocal" tariffs on trading partners, which will mirror tariffs imposed on U.S. goods around the world, will take effect on April 2, as previously indicated.

Asked about worries that the tariffs will harm American producers and consumers, Leavitt echoed Trump's comments in his speech to Congress. "The American people elected this president to have monumental reform and change, including rebuilding our manufacturing base in this country, standing up to foreign nations who have been ripping off our country for decades," she said, "and that requires a little bit of disruption."

Leavitt also advised investors to be grateful for Trump's actions. "I think for folks on Wall Street who may be concerned, look at what this president did for you in his first term. Wall Street boomed. Stock market boomed. The president expects that to happen again," she said. "But most importantly, Main Street is going to boom."

Economy or drugs? Leavitt's comments veered from the argument that Trump has made about the primary reason for the tariffs, which focuses primarily on illegal immigration and drugs, especially fentanyl. Illicit drugs were reportedly a topic of conversation Wednesday between Trump and Canadian Prime Minister Justin Trudeau, the first direct communication between the leaders since Trump imposed the tariffs on Tuesday. Apparently, the conversation was a bit rocky.

"Justin Trudeau, of Canada, called me to ask what could be done about Tariffs," Trump wrote on his social media platform. "I told him that many people have died from Fentanyl that came through the Borders of Canada and Mexico, and nothing has convinced me that it has stopped. He said that it's gotten better, but I said, 'That's not good enough.'"

Trump added that the discussion ended in a "somewhat" friendly manner, but then accused Trudeau, who is stepping down as prime minister, of using the issue "to stay in power." Trump also referred to Trudeau as "Governor," reminding the prime minister that he has called for Canada to join the U.S. as the 51st state - a less-than-friendly suggestion.

The bottom line: Trump postponed the immediate financial pain of tariffs for one group of American manufacturers, but plenty of economic chaos is still on the horizon. Trump's stated goals for the tariffs continues to oscillate, from drug interdiction to manufacturing rebirth to "making America rich again and making America great again," as he put it last night in his speech to Congress - raising serious questions about how trading partners could possibly find ways to respond to his demands and head off what could be a long and damaging trade war.

Quotes of the Day

"The trouble with tariffs, to be succinct, is that they raise prices, slow economic growth, cut profits, increase unemployment, worsen inequality, diminish productivity, and increase global tensions. Other than that, they're fine."

– David Kelly, the chief global strategist at J.P. Morgan Asset Management, as quoted Tuesday by Bloomberg's John Authers in a piece describing Wall Street's "chorus of disapproval" over President Trump's tariff policy.

"This strikes me as foolhardy, unless your intention is to bankrupt the US government by essentially making tax-paying optional. I think the approach they're following so far seems to be taking a wrecking ball to the system without concern for the consequences."

– Kimberly Clausing, a tax law professor at UCLA and a former Treasury Department official under President Joe Biden, speaking to Bloomberg News about the Trump administration's plan to cut employment at the IRS by half. While such a move would likely be popular among Trump's supporters, wealthy or not, experts say it could severely damage the country's ability to collect taxes and provide revenues for the government.

"The revenue loss would be large," said NYU tax law professor David Kamin, who served as an economic adviser in the Biden administration. "Hundreds of billions if not more. ... When it comes to cuts like this, revenue loss could be even bigger as enforcement and service is fundamentally undermined. Voluntary compliance rate is 85 percent. That rate could fall if the agency to administer the tax system becomes a shell of its former self."

Kamin also noted that the news of the planned cuts at the IRS comes at the same time that tariffs are being rolled out, with Congress having zero input in either case. "Shows fundamental disregard for how Congress chose to finance govt and a shift toward more regressive ways of raising $ and that will not make up the difference. That is a bad idea. But, it is a decision that should be and is for Congress and not the unilateral decision of the Administration."

Trump Administration Plans to Cut 80,000 Veterans Affairs Employees

The Trump Administration is planning for a sweeping reorganization of the Department of Veterans Affairs this year that includes cutting more than 80,000 jobs, according to an internal memo first reported by the news outlet Government Executive.

In the memo, VA Chief of Staff Christopher Syrek said that the organization would start a department-wide review in partnership with Trump's Department of Government Efficiency, or DOGE. Syrek said that the VA would "move aggressively" to eliminate waste, reduce bureaucracy and scale back the department's size. He said the goal would be to return the department to staffing levels from the end of 2019, when it had just under 400,000 employees. It reportedly employed more than 482,000 workers as of late last year, with more than 25% of the workforce made up of veterans.

The cuts would undo a staffing expansion under the Biden administration, including what GovExec's Eric Katz reports was a record-setting fiscal 2023, when the Veterans Health Administration, the part of the VA that runs the healthcare system for vets, hired 61,000 new workers. "Both VHA and the Veterans Benefits Administration has been staffing up to accommodate the flood of veterans newly eligible for care and benefits under the PACT Act, though hiring slowed in fiscal 2024," Katz notes.

The Associated Press reports that the VA reached new highs for service last year, with enrollment topping 9 million veterans and more than 127.5 million appointments for care.

The VA memo said that the department would publish its reorganization plan in June and would then enact a department-wide reduction in force before the end of the fiscal year.

Doug Collins, the secretary of Veterans Affairs, said in a video statement Wednesday that the review would be thorough and thoughtful and would make the department work better without making cuts to care or benefits. "The days of kicking the can down the road and measuring VA's progress by how much money it spends and how many people it employs rather than how many veterans it helps are over," he said.

The Trump administration has already cut thousands of jobs at the VA, drawing some political pushback. Sizable additional cuts at the VA are likely to face a significant backlash. Sen. Richard Blumenthal of Connecticut, the top Democrat on the Senate Veterans' Affairs Committee, said the plan would starve the VA to justify privatizing the department.

"Their plan prioritizes private sector profits over veterans' care, balancing the budget on the backs of those who served," he said in a statement. "It's a shameful betrayal, and veterans will pay the price for their unforgivable corruption, incompetence, and immorality."

Republican Rep. Mike Bost, the chairman of the House Committee on Veterans' Affairs, said he had been in touch with VA Secretary Doug Collins after the memo came out. "I have questions about the impact these reductions and discussions could have on the delivery of services, especially following the implementation of the PACT Act," he said. "And from my position as Chairman, I will continue to ask questions and keep a close eye on how, or if, this plan evolves."

White House spokeswoman Anna Kelly said in a statement to the AP that the president "refuses to accept the VA bureaucracy and bloat that has hindered veterans' ability to receive timely and quality care. By making the VA workforce more efficient, President Trump and Secretary Collins will ensure greater efficiency and transparency for our nation's heroes while preserving the benefits they earned."

Number of the Day: $3 Million

As part of its crackdown on undocumented immigration, the Trump administration has been using military transport planes to fly migrants back to their home countries or to U.S facilities at Guantanamo Bay, Cuba, but those flights appear to have come to an end, The Wall Street Journal reported Wednesday. The planes have been used to send a message to migrants and the American public but make little sense financially, since military aircraft are more expensive to operate than civilian planes and carry fewer passengers, resulting in a higher cost per transport. Military planes have been used for more than three dozen flights, the Journal said, including 30 on C-17 jets, which cost roughly $28,500 per hour to fly. In one example examined by the Journal, a flight to India involved multiple stops and in-air refuelings, at a cost of an estimated $3 million for a single round-trip journey.

6 Points About Trump's Big Speech to Congress

1. The state of our union is...ugly. This wasn't officially a State of the Union address, but it certainly demonstrated the state of our politics. Trump's remarks were highly partisan, combative and divisive - a campaign-style speech delivered from the House rostrum, and an extremely long one at that, about 100 minutes. Trump trolled, mocked and attacked Democrats, referring often to former President Joe Biden. He also touted his "swift and unrelenting action" and "astronomical" achievements since returning to office and vowed that he'll continue to "fight, fight, fight" for his agenda. "We have accomplished more in 43 days than most administrations accomplish in four years or eight years - and we are just getting started," he said.

Some Democrats jeered Trump despite being urged by their leaders to restrain themselves, and party members came away from the evening questioning their own strategy. That's a decent summation of our current politics, and the vitriol on display throughout the speech was a sign of how these events have changed in recent years - and how our political discourse has evolved, or devolved.

2. The economy wasn't Trump's top topic. Trump led with praise for his presidency, attacks on Democrats and culture war topics, declaring "our country will be woke no longer." When he did turn to the economy, Trump blamed Biden for the high price of eggs and claimed that he had inherited "an economic catastrophe and an inflation nightmare," contrary to data showing low unemployment, healthy GDP growth. Trump said his fight against inflation would center on his plans to reduce energy costs and save taxpayer dollars via the new Department of Government Efficiency or DOGE. The president claimed without evidence that DOGE has "found hundreds of billions of dollars" in fraud, a much higher figure than the estimated $105 billion in savings DOGE claims on its own website - and that number can't be corroborated either.

Of note, Trump also said that DOGE is headed by Elon Musk, contradicting his own administration.

3. Trump acknowledged his tariffs may cause some pain. Trump defended his tariffs and claimed his policies, including additional tariffs to start on April 2, would help American farmers, but said that farmers may have to "bear with" him as they had done before. ("During the US-China trade tension of 2018, the US Department of Agriculture estimated total loss to US farmers at $27 billion," S&P Global noted recently. "The Trump administration paid $23.1 billion in farm assistance to placate its seething farming community.")

Trump insisted that tariffs would make America rich but might involve some discomfort first. "There will be a little disturbance, but we are OK with that," he said. "It won't be much."

4. Trump said he wants to cut taxes - and balance the budget. He asked Congress for more funding for his immigration crackdown and deportation efforts and pressed lawmakers to make permanent his 2017 tax cuts and pass additional tax cuts, including his proposals to eliminate taxes on tips, overtime wages and Social Security benefits. Amid Trump's plugging of his executive actions, his comments on these topics provided a reminder that he still needs Congress to enact and fund substantial portions of his agenda.

5. Trump's claims about Social Security fraud were not true. He claimed the Social Security rolls include millions and millions of people older than 130 and that many of those people fraudulently continue to receive benefits. But as Trump's own acting Social Security commissioner said last month, the majority of the people the president was talking about do not have dates of death in Social Security's records and are not necessarily getting benefits. "Public data from the Social Security Administration shows that about 89,000 people age 99 or over were receiving Social Security benefits in December 2024, not even close to the millions Trump invoked," CNN reports in a fact check.

6. And he continues to make false claims about aid to Ukraine. Trump keeps saying that the United States has sent some $350 billion to Ukraine while Europe has sent $100 billion. "Those are both imaginary figures," CNN fact checker Daniel Dale said. See more details about U.S and European aid to Ukraine here or here.

Fiscal News Roundup

• Trump to Delay Canada, Mexico Tariffs on Autos for One Month – Bloomberg
• Canada Won't Scrap Tariffs Unless All US Levies Are Lifted, Official Says – Bloomberg
• Trump Administration Plans to Cut 80,000 Employees From Veterans Affairs, According to Internal Memo – Associated Press
• Divided Supreme Court Says Judge Can Force Trump Administration to Pay Foreign Aid – Washington Post
• Trump Administration Considering Criminal Referrals in USAID Fight – The Hill
• Thune: Senate GOP Isn't Unified Yet on Tactic to Get Around Cost of Tax Cut Extensions – Politico
• Trump Administration Deletes List of Hundreds of Federal Buildings Targeted for Potential Sale – Associated Press
• Trump Touts DOGE Success, but the Numbers Are Fuzzy – Politico
• Department of Government Efficiency Deletes a Claim and Resurrects an Error – New York Times
• Congress' Proposed Cuts May Jeopardize Medicaid and Negatively Impact the Economy, Report Finds – CNBC
• A Federal Judge Extends a Block on N.I.H. Cuts to Research Funding – New York Times
• Trade War Puts Sales of 12 Million Tons of US Crops Under Threat – Bloomberg
• Latest Negative Economic Data Is 'Biden Data' and Trump Will Fix It, Commerce Chief Lutnick Says – CNBC

Views and Analysis

• Wealthy Tax Cheats Set to Benefit From Trump Plans to Halve IRS – Michael Rapoport, Erin Schilling and Lauren Vella, Bloomberg
• Fact-Checking 26 Suspect Claims in Trump's Address to Congress – Glenn Kessler, Washington Post
• Fact-Checking Trump's Address to Congress – Staff, CNN
• During Trump's Rowdy Speech to Congress, the Quiet Moments Said the Most – Shawn McCreesh, New York Times
• Trump Uses Old Tricks to Sell a New Agenda – John F. Harris, Politico
• The State of Donald Trump's Union Is Permanent Culture War – Harold Meyerson, American Prospect
• Trump Promised Retribution. Turns Out He Had a Very Big Target in Mind – Jamelle Bouie, New York Times
• Trump Celebrates His Disruption but Slides Over Its Costs – David E. Sanger, New York Times
• The Trump Depression – Robert Kuttner, American Prospect
• Elon Musk's Conflicts of Interest Are Becoming Real – Thomas Black, Bloomberg
• To Stop Tariffs, Trump Demands Opioid Data That Doesn't Yet Exist – Josh Katz and Margot Sanger-Katz, New York Times
• Trump's Decision to Halt Aid to Ukraine Could Reorder the Battlefield – Helene Cooper et al., New York Times
• How Soon Could Ukraine's Forces 'Start to Buckle' Without U.S. Weapons? – Lara Jakes, New York Times
• Trump Picked a Health Economist to Lead the N.I.H. It's Not a Bad Idea – Anupam B. Jena, New York Times