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Federal cuts will be felt in cities, states
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This is Washington Edition, the newsletter about money, power and politics in the nation’s capital. Today, senior Washington correspondent Ted Mann looks at how federal spending cuts hit closer to home for millions of Americans. Sign up here and follow us at @bpolitics. Email our editors here.

Austerity Program

For all the attention paid to the attempt by President Donald Trump and Elon Musk to cut spending in Washington, it’s out in the rest of the country where millions of Americans are most likely to feel the effects. 

States, counties, cities and towns are already paring back future plans and cutting their own budgets as they brace for the administration’s austerity measures to hit. 

That means pain that will be felt broadly, particularly in places that voted overwhelmingly to return Trump to the White House. On a per capita basis, red states like Alaska, Kentucky and Louisiana are among those most dependent on federal money, a Bloomberg analysis of federal spending data shows.

What that means in practice is a challenge that falls on many local officials.

Take Waukesha County, Wisconsin, where Republican County Executive Paul Farrow said his region stands to lose some portion of the $40 million to $50 million it gets annually in direct funding from Washington to use on local services.

There, the long-running upgrade of a six-mile link between Interstates 43 and 94, near Milwaukee, is now caught in the same funding limbo faced by road, rail and bus projects around the country, including some that were started when Joe Biden was president.

Farrow is running budget analyses, trying to plan for what the county might have to pay for out of its own coffers. One possibility they have to consider: that the feds might cut them off altogether.

The Bloomberg analysis also shows how the administration is pulling back on the spending levers under its control. In February, the federal government made $4.3 billion in obligations — the Washington budgetary term for a formal go-ahead to start spending grant money. That’s 57.5% less than in the same month one year earlier.

The stated goal of the Trump administration — and of Musk, to the extent he sticks around — is austerity: a relentless, spare-no-ox evisceration of budget lines, grant programs and entire agencies, notwithstanding the beneficiaries of the usual annual largesse. 

Will Congress bless (and share ownership of) such an aggressive approach? That’s no sure thing.

A hit dog will holler, the saying goes. A member of Congress shouted down at a town hall by outraged voters might call the White House to beg for relief — or vote to keep spending money.

How deep the administration’s push to curb federal spending goes – potentially undoing the foundation of what local government has chosen to fund in its own budgets – will depend on Trump’s willingness to make even his own supporters endure the cost. —  Ted Mann

Don’t Miss

Federal Reserve Chair Jerome Powell said officials are not in a hurry to adjust interest rates, adding tariffs could lead to higher inflation and unemployment

Fed chair says unemployment also could rise

Trump said he’s unwilling to preemptively lower tariffs on China in order to unlock more substantive negotiations with Beijing on trade, as US and Chinese officials are set to meet this weekend in Switzerland. 

The Trump administration plans to rescind Biden-era AI chip curbs as part of a effort to revise semiconductor trade restrictions that have drawn opposition from major tech companies and foreign governments

The administration is set to shrink the ranks at the top US financial regulators by more than 2,300 workers, a group that includes bank examiners, criminal investigators and economists.

The US is shifting its focus away from a 30-day ceasefire in Russia’s war with Ukraine toward shaping a long-term peace settlement, Vice President JD Vance said.

More than half of the top holders of Trump’s memecoin — who are jockeying for dinner with the president — have used foreign exchanges that claim to ban US users, suggesting they are based outside the US.

Getting clemency from the president could cost as much a $1 million or more for the attorneys, lobbyists and consultants to put a case together and get it in front of the White House.

The White House is pulling its nomination for Fox News contributor Janette Nesheiwat to be US surgeon general, the second high-profile health nominee to be withdrawn.

No American automaker stands to lose more in Trump’s trade war than General Motors, which imported more vehicles into the US last year than any other car company, even Japan's Toyota.

Amtrak is cutting roughly 20% of its top-level management staff in an effort to reduce costs amid uncertainty about Trump’s plans to invest in infrastructure.

The pharmaceutical industry estimates Trump’s new drug pricing proposal could cost drug companies as much as $1 trillion over a decade, so they’re gearing up a lobbying campaign in Congress.

The Air Force is pushing to speed the delivery of the new Air Force One, service officials said, as Trump grows more impatient about getting a redesigned plane before his second term ends.

The Trump administration's purge of federal workers has impacted offices inside at least a dozen US government agencies that are responsible for fielding Freedom of Information Act requests. In all, it stands to jeopardize the public’s ability to access government documents. What questions do you have for Bloomberg's senior investigative reporter and FOIA expert Jason Leopold? Join us for a Live Q&A on Friday May 9 at 1 p.m. EDT.

Watch & Listen

Today on Bloomberg Television’s Balance of Power early edition at 1 p.m., host Kailey Leinz interviewed Representative Greg Murphy, a North Carolina Republican, about the ongoing effort in the House to shape a massive tax cut and spending bill.

On the program at 5 p.m., Kailey and Mike Shepard talk with Republican Representative Lisa McClain of Michigan about Powell’s remarks and the debate among House Republicans over cuts to Medicaid.

On the Odd Lots podcast, Bloomberg’s Tracy Alloway and Joe Weisenthal talk with Stephen Burke, the founder of Gamers Nexus, about how tariffs will hit the computer gaming industry, which is highly reliant on inputs from China and other East Asian countries. Listen on iHeart, Apple Podcasts and Spotify.

Chart of the Day

Fears that rent inflation will stick around are growing once again, according to a survey released by Fannie Mae Wednesday. The April 2025 National Housing Survey shows that over the next year, consumers expect rental prices to increase 6.4% on average. That's the highest in more than a year and a percentage point above the average over the past year. The higher anticipated rents creates a headache for the Fed since it makes it more difficult to send the message that inflation is well controlled. If the public expects that rent inflation will increase it can also suggest that people may expect higher wages as well. —  Alex Tanzi

What’s Next

Wholesale sales and inventories for March will be reported tomorrow.

The Bureau of Labor Statistics’ productivity estimate for the first quarter will be released tomorrow.

The consumer price index for April will be reported next Tuesday.

Trump begins a three-day trip to the Middle East next Tuesday.

Data on retail sales for April will be released next Wednesday.

The producer price index for April also will be reported next Wednesday.

The University of Michigan’s preliminary reading of consumer sentiment for this month will be reported May 16.

Seen Elsewhere

  • Salt Lake City, Utah, and Boise, Idaho, adopted new official city flags supporting the LGBTQ community in response to state laws barring the display of nonofficial flags at schools and government buildings, the New York Times reports.
  • US intelligence agencies have been ordered to step up their collection efforts in Greenland to identify people there who support Trump's campaign to take over the island, the Wall Street Journal reports.
  • A genetic variation found in women on a South Korean island who regularly free dive as deep as 60 feet underwater to gather food may lead to medications to help people at risk of stroke or high blood pressure, the Washington Post reports.

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