Both Democrats and Republicans face ample economic contradictions as Donald Trump prepares to assume the presidency. On the surface, the economy looks good overall, with unemployment at 4.1% and inflation at around 2.5%. But the budget deficit is north of $35 trillion. As a result, gold is at a record high, bitcoin is considered a hedge, and the primacy of the dollar is a matter of conjecture.

Surprisingly Trump and the Democrats (at least as far as the deficit is concerned) appear to be on the same page. The Donald does not like the debt ceiling any more than Hakeem Jeffries or Chuck Schumer. Although this is tempered by vastly different priorities concerning public policy, it questions the aims of the various groups formally known as tea partiers that do believe deficits matter. For Trump, it is a tricky proposition, given that he does affiliate at least publicly with the more populist MAGA-wing

Given the narrow margins in the House of Representatives, it is unlikely that safety net programs such as Social Security and Medicare will be altered. Medicaid, which has quite a few recipients in red states, will be a matter of contentious debate. Even the Affordable Healthcare Act appears more secure than it did in Trump’s first administration.

Despite some of his rhetoric, Trump never enjoyed playing Scrooge, and GOP Representatives given their threadbare margin are still addicted to holding their jobs. On the face of it, it does not give much room for bold actions. The deficit Hawks do have a point in wanting something to be done. The first would be to increase taxes, especially on the super-wealthy. But Trump is in favor of a new tax cut, favoring the rich on the theory that they will invest more in the U.S. Even Stephen K. Bannon, the chief voice in MAGA, opposes that route, arguing for populist economics. He wants a cut that favors the lower middle class. While Trump wants accelerated military spending, Bannon and his supporters suggest a cut. But the wild cards, Elon Musk and Vivek Ramaswamy, favor $2 trillion in budget cuts, which would not go down well with the MAGA base. Mind you, Democrats will have their say.

So what is to be done? To not adjust the budget is to stoke inflation and raise havoc in the bond and currency markets. Continuing resolutions hide spending priorities and kick tough decisions down the road. Again, Trump has not shown any tendency to embrace Project 2025 with its Draconian cuts in any shape or form. As the L.A. fires demonstrate, there are no shortage of emergencies that could further burden the budget.

Up to this point, Trump has shown a disinclination to bite the budgeting bullet. He endorsed speaker Mike Johnson’s December reconciliation proposal and delayed action until March. Although this was done in the spirit of political practicality, it provided the opportunity for opponents to regather their forces. Trump has shown a tendency to think that Americans are not particularly fond of sacrifices. As the late President Jimmy Carter found out in 1979-1980 to his dismay. Americans are not enthusiastic about doing the right thing. For Trump and Congress, these are difficult times requiring thoughtful decisions, even unpopular ones.