Does Trump's economy spell doom for Seattle?

[00:00:10] Hello and welcome to the latest edition of Seattle Nice. It's day 81 of the authoritarian Trump administration. I'm David Hyde with Erica C. Barnett of Publicola. Erica, how is your day or your week going so far before we really interrupted you with this podcast so early? Oh, it's going fine. You sound awfully cheerful about day 81. Is that because we're 81 days closer to the end? I don't know why. Political consultant Sandeep Kaushik, how are you?

[00:00:37] I'm good. I'm good. You know, tariffs around the world in 81 days. Why not? All right. On the show today, Seattle freaking out about the Trump administration. School kids being rushed inside because someone thought they spotted an ICE vehicle. And Erica's got some bad news about local homelessness programs and how they're being affected by Trump's slash and burn cuts.

[00:01:02] But first, more bad news. Erica, I can't believe I'm laughing. About the city budget forecasting now a $241 million revenue gap. Don't forget that one. Yeah. The Budget Forecast Council for the city came out with new numbers this week and it's bad. We knew it was going to be bad because of, you know, all the shit that's going on around the world.

[00:01:31] Tariffs are already starting to affect Seattle, you know, et cetera, et cetera. Stock market crashing. But there's now a $241 million new gap for the next two years of the budget. And that comes largely because jumpstart revenues are coming in lower than anticipated. And, you know, the city council and the mayor have used jumpstart revenues.

[00:01:56] And this is the payroll tax on big corporations to backfill the general fund budget for years now. And eventually that's not going to be sufficient, even if they use all of the jumpstart money, unless there's a sudden reversal during the Trump administration. You know, the stock market goes crazy and jobs come back. But but it's a volatile tax and it does look like some jobs are leaving Seattle because of it.

[00:02:23] It relies really heavily on just 10 companies, mostly Amazon. And and so the city council and the mayor are going to have to make some tough decisions this either this year or they could maybe forestall it till next year when it's no longer an election year. But but yeah, we're looking at cuts. Sundy, I want you to get in here. But these are these are revenue forecasts in part based on all this insane volatility that's happening due to the tariffs and everything else.

[00:02:52] And that shit keeps changing every day. So like I'm curious, like, how do they how do they even make a forecast like this? It's with so much uncertainty. It just seems like the variables have to be really wildly variant in a situation like this. There's a lot of stuff in the actual forecast that shows that where you have all these charts showing the stock market going up and down and up and down really radically.

[00:03:16] I think that's why they ended up going with the pessimistic version of the forecast, which they don't usually do. The last time they did that was when covid shut down the economy that April of 2020. And so they're just kind of banking on continued volatility. But there's not a whole lot of reason to believe at this point that, you know, the economy is going to become amazing under Trump or that, you know, all the cuts that, you know, as you mentioned, slash and burn cuts that we're going to talk about are not going to affect, you know, jobs and revenue.

[00:03:47] And, you know, the city's ability to provide services. I mean, it just it all, you know, kind of snowballs and they do revenue forecasts three times a year before the budget comes out. So this is just the first one. And so we will have more information later in the year in August and then again in October. But this is a first look at what the city thinks is going to happen in the next few years.

[00:04:09] And real quickly, I also reported last year on the 2027 and 2028 predictions that were in last year's budget. Those are usually, you know, a little bit sketchier because they're further out. But Bruce Harrell's budget for 2025 and 26 had big revenue shortfalls starting in 2027 already. And so this is going to compound those revenue shortfalls and, you know, and make them even bigger, you know.

[00:04:36] So instead of, say, one hundred seventy million dollars, you know, it's going to look more like maybe three hundred million dollars. So this is this is a compounding problem. And the city has basically ignored these budget problems in the last year anyway. Last year, they added one hundred million dollars in new spending on top of a budget that already had a deficit. And they did that by just kind of by digging into Jumpstart and just kind of assuming that it would continue growing forever.

[00:05:03] Yeah. And just to be clear about how the sort of budgeting forecasts work, David, to your question on volatility. And as Erica mentioned, they actually produce, Erica, am I right, three different budget forecasts. They do an optimistic version and a baseline version and a pessimistic version. And as you were saying, this time they adopted the pessimistic version. The only ones they presented were the baseline and the pessimistic this time. Oh, they did not present. There is no optimism anymore. Yeah. There's no reason for optimism.

[00:05:33] That probably seems fair. I mean, obviously, David, to your thing about this, I mean, nobody fucking knows what's going to happen with the economy. Given, you know, the sort of chaotic nature of what Trump is doing in terms of global trade and tariffs and, you know, that we're doing this on Friday morning. And, you know, and who knows what they're going to be doing on Monday. Right. I mean, there were just new news about the Chinese raising their tariffs in a retaliatory way.

[00:06:02] Just this morning to more than 100 percent on American stuff. Who knows how Trump's going to respond to that? All of that stuff. Obviously, we're very connected to the Pacific Rim and all of that trade, you know, that happens from China. A lot of that stuff flows through our port. Well, and Canada, too. I mean, we're you know, we get a lot of our energy from Canada. I mean, there's just you know, that's already showing up in this April forecast. Just the fact that, you know, Canadian tourism is down and there's just there's a lot of stuff, you know, right on our front door.

[00:06:30] That's revenues that are going away. One of the points I keep hearing people make just to reiterate, to emphasize what you're saying is that it doesn't really matter what Trump does now, even if he relents with China, even if he goes ahead and gets rid of these 10 percent tariffs on every country. And even if he tries to introduce stability to the system, global capital no longer really believes him.

[00:06:53] So the credibility that underpins the United States's entire economy and the strength of the dollar and everything else has been possibly irrevocably like undermined by the volatility that this administration has shown so far.

[00:07:09] Yeah, I mean, from the reporting I'm reading in The New York Times and elsewhere, it sounds like what really caused Trump to blink on the, you know, massive tariffs across the board for everybody, you know, every other country was the bond markets. David, to your point, the bond markets were starting to show real signs that trust in U.S. treasuries was collapsing. Right.

[00:07:33] And that has enormous, enormous and very bad potential consequences. And so they did blink on that for now. But how much damage has already been done? And just to add on top of this, we talked about this last week, too. These forecasts are still coming at a time when we haven't tipped over into a full-blown recession yet.

[00:07:58] And that could easily happen, in which case I think these forecasts, as pessimistic as they are, might turn out to be pretty optimistic. Well, the forecast does assume a recession. Does it? OK. Yeah. But, I mean, we don't know how bad it's going to be and if it's going to be a depression.

[00:08:15] You know, and I mean, it's also, I mean, I think it's very interesting, and Sandy, if I'm surprised you didn't seize on this, but it's interesting that it does seem that the job growth is happening outside of Seattle in King County, which is some of the reason that, you know, the jumpstart revenues are projected to be low. I mean, there's a lot of opacity about this data because, you know, Facebook, Amazon, Google don't want to reveal, you know, information about their revenues.

[00:08:42] But, you know, the correlation is there and it's probably causing it. Yeah. I mean, I think it's pretty clear that Amazon is moving jobs to Bellevue, right? And so what we know is that there are about 17,000 Amazon jobs that have been created in Bellevue. Probably not all of those are jobs moved from Seattle, but some significant portion of them are, right?

[00:09:05] And so to the extent what I have been told from people who know more about this than I do is that a lot of Amazon leases on buildings in downtown Seattle and in, you know, South Lake Union are coming up in the next few years. And as those leases come up, they're making decisions about whether to renew or keep those jobs there or whether they can feasibly move those jobs out of Seattle to avoid paying the jumpstart tax. So that's probably going to continue.

[00:09:34] And I think, you know, I have real questions about, you know, especially in election year. But in general, if this mayor and this council are up for making really tough choices, I mean, even if the city decided to go for, you know, multiple revenue options and they've already rejected a capital gains tax, which is probably going to be the most lucrative option.

[00:09:55] But if they decide to do capital gains, you know, and it's like maximally, you know, effective and they decide to do, you know, some other options, you know, which is very unlikely. It's not going to even make a dent or it will make a small dent in the in the issue.

[00:10:11] And this council and this mayor, you know, have, as I said in my piece today, they larded the budget last year with all kinds of goodies for things that they wanted, you know, from $10 million for new CCTV cameras and a new real time crime center all the way down to, you know, Rob Sokka's curb removal in his neighborhood. And so I don't see a lot of appetite for making cuts.

[00:10:34] And, you know, it's probably going to require the kind of cuts we saw in the last recession, because this recession, you know, could theoretically be even deeper, even if, you know, right now they're predicting it will be shorter. You know, it's just I don't know. I don't know that this council and this mayor are up for that task. The one time they were tested, you know, last year, they didn't make cuts. They, you know, like I said, they just piled on goodies like a Christmas tree. Right. Well, they may not have a choice here.

[00:11:02] Right. So my recollection from last fall's budget process was that they had a the mayor had proposed retaining a $40 million reserve in in the jumpstart account. And they did spend pretty much all of that down. Right. By the time they finished the budget process. So there isn't a reserve in the jumpstart account. You know, they do have reserves in the in the general fund archives you talk about in your piece that they, you know, could potentially start to spend down.

[00:11:29] But so they did, you know, they did. You know, there was a lot of that. There was a lot of sort of spending added on to the mayor's proposal as the budget went through its process last fall. And and that's going to make the budget challenge this year harder to deal with. But as you say, they probably don't have any choices here but to do but to start looking at cuts.

[00:11:53] And the other thing they did do in the budget process last year is there were a number of slides that the council put put in place. So statements of legislative intent where they and provide those where they basically asked the departments to come back with kind of analyses of spending and where they have. So we're going to start seeing those, I think, between now and budget this fall.

[00:12:18] And that could start pointing pointing to some directions where potentially cuts are going to start happening. I mean, I like your optimism about a thoughtful budget process that starts now. But, you know, last year, I mean, as I wrote, I mean, it was just incredibly chaotic. It was unclear what was happening on the last couple of days of the budget. People were throwing in amendments at the last minute left and right. And I think it's very hard to say no.

[00:12:44] And, you know, and I don't think that Mayor Harrell wants to be the austerity mayor in an election year. And, you know, maybe maybe he's got it all sewed up. Maybe it doesn't matter. I don't think that that's probably true. And I think that he will try as hard as possible to forestall cuts until the next budget cycle when he's not up for reelection. Maybe I'm being cynical, Sandeep. What do you think? Support for Seattle Nice comes from Hearth Protection,

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[00:13:37] Armed or unarmed agents trained in de-escalation and advanced first aid are available 24-7. More information at hearthprotection.org. Hearth Protection. Don't let fear make your world smaller. You know, he doesn't want to be the austerity mayor, but he also doesn't want to be the big new taxes mayor, right? So something's got to give. So I don't know what all they're going to do or what exactly they're going to do.

[00:14:07] You know, it seems kind of an open question right now. I don't know. I just heard this Mike Tyson quote. Have you ever heard this one? Everyone has a plan until you get punched in the face. Yeah. I have heard that quote. That's right. Right. Seems relevant here. Seattle seems like it's getting punched in the face. Yeah. And that's an opportunity to bring up the other bad news story from Erica. Bearer of bad news this week. Can we blame you? Blame the messenger? Trump administration cuts hurt homelessness services.

[00:14:36] This also does not sound good. I mean, this is truly just one example of the many, many, many, many types of services and, you know, and priorities that are going to get cut by the Trump administration. Alexis Mercedes Rink, a council member, has started this committee that is basically exists in order to discuss these issues. And she's been bringing panels of people who are, you know, representative of groups that are going to be impacted by federal changes.

[00:15:05] And so last week it was homelessness organizations, including the King County Regional Homelessness Authority, Downtown Emergency Service Center and others to talk about. And also, you know, housing financiers talk about how the Trump administration policy is going to impact housing finance, which is not good, and how it's going to directly impact homelessness programs. And they also talked about immigration programs, programs for immigrants, including kids who need legal representation.

[00:15:35] And I mean, yeah, I mean, these are just straight up cuts that are happening. You know, as we all know, the Department of Health and Human Services has been slashed. And Trump is, you know, I mean, except for the the task force on, you know, vaccines causing autism or whatever, funding has just been slashed. And the homelessness programs that exist locally depend very, very heavily on direct federal funding.

[00:16:01] So, for example, DESC gets about I think he's I think Daniel Malone said like a third of its funding or a quarter of its funding from the federal government. So that funding either has to be replaced or people are going to be out on the streets in pretty short order. There's an organization, KCRHA gets like sixty six million dollars in federal funding. So, you know, we're talking about huge, huge numbers and huge, huge cuts.

[00:16:28] And so, you know, again, like for the city, the question is, you know, what what of that money can we replace locally? And how do we triage those priorities? You know, do we try to build more housing, which takes a couple of years? Do we want to keep people from being dumped on the street, which is a more, you know, perhaps urgent priority? So it's I mean, it's a really bad situation and that's just homelessness. I mean, every other sector of publicly funded services and projects is going to be impacted.

[00:16:58] Yeah, man, I've been so as I've said before, but disclosure, I'm on the DSE board. This has been an ongoing topic of conversation there because obviously there's a huge amount of concern about what this potential or actual loss of federal funding is going to mean for the organization and its ability to provide services. But it's not, you know, beyond DSE, I was just talking with Steve Woolworth, who is the head of Evergreen Treatment Services yesterday.

[00:17:27] And he was telling me they've already lost several million dollars in federal funding that they were expecting to come in that they know now is not going to be coming in for the work that they're doing. Evergreen Treatment Services is the main, you know, methadone provider in the city of Seattle and does mobile methadone as well as the methadone clinic down at Airport Way and other places.

[00:17:50] I was talking to Lisa Dugard in the last week and she was losing funding, you know, for PDA Purpose Dignity Action and, you know, the program that does lead and co-lead. So there's already some pretty significant funding losses. But the really scary thing about all of this is that the shoe really hasn't dropped yet. Like the Trump administration has not quite gotten around to like saying what they're really going to do in terms of homelessness policy at the federal level.

[00:18:17] The ominous news this week is that there are huge cuts they just announced at the Interagency Council on Homelessness, which is the federal government's like, you know, sort of homeless policy organization. I think I read in the headlines, it didn't get a lot of attention because there's so much other news, but I think around the head of there were 70 percent of the Interagency Council on Homelessness funding just got cut. Right. You know, so that's a massive cut there.

[00:18:44] But they eliminated the mental health and addiction agency completely. Right. And then but they haven't what they haven't done yet is said, are they going to make a full frontal assault on anything that's housing first or harm reduction? Really? I mean, they haven't quite announced that yet, but it would not be at all surprising. Given what they're doing, that they're going to say we're just going to cut off all funding for this stuff because we don't like.

[00:19:11] Yeah. And to explain what housing first and harm reduction are, I mean, there's you know, we've talked about it before, but there's a big debate nationally. I think a disingenuous debate, but there is a big push to get rid of, you know, services and housing that do not put a bunch of strictures on people and punish them. If they, you know, for example, relapse from addiction, you know, P tests like requiring people to be sober. They're out on the street. Harm reduction is stuff like methadone. It's stuff like suboxone.

[00:19:41] It's, you know, providing. I mean, it, you know, once was a needle exchanges were a major harm reduction service. And so, you know, it's, it's a very punitive approach that is not evidence-based, but it's what the right wing and, you know, Trump administration project 2025 is all about. So, yeah, I mean, I think that that shoe is going to drop and that is going to be potentially devastating if they just say, nope, we're only doing treatment first.

[00:20:07] We're not funding all these programs anymore because it is the main service approach in Seattle and, you know, across the U.S. broadly is to sort of meet people where they're at and put people in housing first and then, you know, deal with their other needs. Does anybody have a sense of the scale of how many of these dollars are state and local and how many are federal? Like, is there a ballpark estimate? Is like a third of the money or two thirds of the money? Or I have no sense of that.

[00:20:35] Well, in the DESE case, as Erica was saying, a quarter of the money by DESE's estimate is federal dollars, right? That some of that I think does pass through the state. And is that kind of standard for our social services? Or, I mean, can we generalize? I think it really varies, David. I think it varies a lot, yeah.

[00:20:52] Like one of the agencies that this committee discussed last week is a – it provides legal counsel for immigrant children who would otherwise have to represent themselves. Because, you know, there are kids who, you know, as young as one year old who are, you know, would have to represent themselves in court if they didn't have these services. And that agency – I'm not sure what percentage of their funding is federal, but they – it's enough that they are shutting down, essentially.

[00:21:23] So, you know, it just – it varies a lot. But for some, it's all or almost all, you know. Just to pile on the bad news here because we talked about the shitty city budget and now there's like, you know, the Trump administration like slashing and burning, you know, huge amounts of the federal government and federal funding for key programs, you know, to deal with things like homelessness and addiction.

[00:21:47] But the state budget situation is also incredibly grim. And there are likely significant cuts coming to a lot of state funding for programs like this as well, right? I mean, there are states looking at a – I forget, $15 million budget shortfall over the next four-year period. And there's a whole argument and conversation going on in Olympia about taxes and cuts and what they're going to do.

[00:22:17] But there's clearly going to be some cuts and probably significant cuts coming. Often when there's a recession, things become more affordable. But that also doesn't look like it's going to happen either. So anyway, let's turn now – If anything, we could have stagflation, right? Because if – Yeah. Prices of goods are going to go up if there's, you know, all the stuff we get from the rest of the world is mass – Timber from Canada that builds housing. It's stuck with these huge – Let's make it more expensive. You know, right? And that should raise –

[00:22:47] Drywall for Mexico. If those tariffs do go into effect, that's going to raise the prices of all of those goods at the same time that the economy is tanking and people have less income, right? So that's – we haven't had that since the 70s, right, when the OPEC oil shocks created that era of stagflation. And I'm just old enough to remember how freaky that was like for, you know, the American economy at the time. Yeah, that's before my time. You are old enough. I agree.

[00:23:17] Well, let's turn now to eighth graders at Denny International Middle School brought inside Wednesday after the school received reports of what its staff thought – I'm quoting here from the Seattle Times – was a U.S. immigration and customs enforcement vehicle in a parking lot across from the school. Sandeep, Erica, did either of you catch this story? Yeah, I caught it when the Seattle Police Department sent out an alert saying that this was not an ICE vehicle.

[00:23:42] It was an SPD vehicle and maybe an overenthusiastic school staffer warning parents about this, you know, and causing a panic. But, you know, I mean, it's an understandable panic. But in this case, I mean, kind of as with some very early reports, you know, early on in the Trump administration that ICE vehicles were, you know, stalking around Queen Anne and, you know, oh my God, there's ICE vehicles seen downtown.

[00:24:08] I mean, I don't want to downplay the fact that Trump is, you know, trying to deport millions of people and is deporting people, you know, obviously unjustly. But there's been a few panics in Seattle that, you know, I think that probably news reporters should have maybe done a little more research on before putting up stories with headlines about ICE vehicles spotted near West Seattle. Right, because this got reported sort of in the Seattle Times, right, initially, and then they had to walk it back, as I understand what happened.

[00:24:38] So, I mean, basically, the situation was that there was a, you know, police-looking vehicle parked nearby. It was a West Seattle elementary school. Some people freaked out, told the principal it's an ICE vehicle. The principal kind of freaks out. They pulled all the kids back in who are outside the school on the playground or whatever, and they pulled them all back in the building and sent out this alarm, you know, email to parents and stuff like that.

[00:25:01] And it turns out it was just, like, SBD doing some, you know, routine SBD stuff, right? And ICE was not involved. Marking around schools, as they do. Yeah, yeah. They said they were there for safety reasons to try to prevent crime and protect students. Yeah, to deter a crime. There's been some crime around there. Yeah. And instead, it turns into, like, a total freakout.

[00:25:25] So, it's a little, obviously, kind of embarrassing, and I think folks like Seattle Public Schools need to figure out some protocols about how to deal with these situations going forward because there's not going to be more of this. Well, it's sort of like the period before the French Revolution or something. It's like it's almost as if you start snatching people off the streets with men wearing masks for committing thought crimes, people start behaving in erratic ways because they have no idea what the authoritarian regime is going to do next. No, I mean, it completely makes sense.

[00:25:54] And, like, I don't, you know, blame the principal for freaking out. I don't think that they probably acted properly in, you know, warning parents about this. And I think that the Seattle Times should not have just reported ICE vehicle scene near West Seattle School, which they did, you know, and referred to the ICE vehicle repeatedly in their original story, which I'm looking at right now. You know, that's, like, just basic due diligence for reporting, and they didn't do it. Yeah, that's a fuck up. That's a pretty big journalistic fuck up, right?

[00:26:24] Also, help keep us calm in this moment of uncertainty by reporting the facts. I mean, it would be helpful. But to the point that both of you are making, or David, you and I were talking about this yesterday, some of the things that the Trump administration is doing right now, and that they're talking about doing it. I mean, the fact that now they're talking about wanting to, like, spirit away American citizens to this gulag in El Salvador and put the, you know,

[00:26:52] hopefully the courts or somebody will stop them from doing that. But it's really fucking, you know, freaky. It is freaky. You know, legitimately, they're doing some stuff that is caused to be really, really, you know, worried. So, yeah. I mean, it's understandable that people are on edge. But go tap on the police window next time and ask them if they're cops. Yeah, yeah, yeah.

[00:27:19] But don't report, like, yeah, just because a rando tells you, like, I just come around. Don't stick that in the paper, right? Yeah. That's probably not the right way to respond. All right. That's it for, God damn it, one of the most depressing episodes of Seattle Nights that I can remember in a long time. With Erica C. Barnett of Publicola, Sandeep Kashuk, I'm David Hyde. Our editor is Quinn Waller. And thank you for enduring this episode. If you lasted to the end, we're with you.

[00:27:46] We'll try to keep it even more grim going forward. Next episode's going to be, I don't know, what are we going to talk about? Like pinball machines or something. It'll be just fun.