Brownstone Institute
Trump’s 19th-Century Solution to Fiscal Disaster
From the Brownstone Institute
By
In the last weeks of the campaign, Donald Trump is slicing and dicing the Federal income tax nearly as fast as he served up fries at the McDonald’s drive-thru window last weekend. So far, he has proposed to extend the lower rates, family tax credits, and investment incentives of the 2017 Tax Act after they expire in 2025 and to also exempt tips, Social Security benefits, and overtime wages from the Federal income tax.
Those items alone would generate a revenue loss of $9 trillion over the next decade, but he has recently proposed to also exempt firefighters, police officers, military personnel, and veterans from the Federal income tax as well.
We estimate the latter would cost another $2.5 trillion in revenue loss over 10 years. As it happens, there are 370,000 firemen, 708,000 policemen, 2.86 million uniformed military personnel, and 18.0 million veterans in the US. These 22 million citizens have an estimated average income of $82,000 per year, which translates to about $60,000 each of AGI (adjusted gross income). At an average income tax rate of 14.7% these exclusions would generate $250 billion per year of reduced income tax payments.
In all, Trump has thus tossed out promises to cut income taxes by $11.5 trillion over the next 10-year budget window. In turn, these sweeping reductions would amount to upwards of 34% of CBO’s estimated baseline income tax revenue of $33.7 trillion over the period. Alas, even in the halcyon days of Reagan supply-side tax cutting no one really dreamed of eliminating fully one-third of the so-called crime of 1913 (the 16th Amendment which enabled the income tax).
10-Year Revenue Loss:
- Extend the 2017 Trump tax cuts: $5.350 trillion.
- Exempt overtime income: $2.000 trillion.
- End Taxation of Social Security benefits: $1.300 trillion.
- Exempt Tip income: $300 billion.
- Exempt Income of Firemen, Policemen, Military and Veterans: $2.500 trillion.
- Trump Total Revenue Loss: $11.500 trillion.
- CBO Income Tax Baseline Revenue: $33.700 trillion.
- Trump Revenue Loss As % of Baseline: 34%.
Then again, Trump may have something virtually epic in mind. To wit, scrapping the income tax entirely in favor of taxing consumption via levies on imported goods and merchandise.
“In the old days when we were smart, when we were a smart country, in the 1890s and all, this is when the country was relatively the richest it ever was. It had all tariffs. It didn’t have an income tax,” Trump said at a sit-down with voters in New York on Friday for Fox & Friends.
“Now we have income taxes, and we have people that are dying.”
The New York Times is deeply alarmed: “The former president has repeatedly praised a period in American history when there was no income tax, and the country relied on tariffs to fund the government.”
Actually, however, 19th-century America was even smarter than Trump realizes. In 1900 total Federal spending amounted to just 3.5% of GDP because back then America was still a peaceful republic and had no Warfare State or even significant standing army at all. And save for the most advanced precincts of Europe, the Welfare State hadn’t yet been invented, either.
So, yes, the so-called “revenue tariffs” of the 19th century did meet the income needs of the Federal government to the point of actually balancing the budget year after year between 1870 and 1900. Indeed, the actual annual surpluses were large enough to pay down most of the Civil War debt, to boot.
Today, of course, the Warfare State, Welfare State, and the Washington pork barrels account for 25% of GDP. So Trump may be directionally correct in wanting to tax consumption rather than income, but, as usual, he’s off by about seven orders of magnitude when it comes to the size of the Federal budget that needs to be financed.
Still, Trump has stepped up to the plate when it comes to a 21st-century version of the revenue tariff. He has pledged to impose a 20% universal tariff on all imports from all countries with a specific 60% rate for Chinese imports. Based on current US import levels of $3.5 trillion per year from worldwide sources and $450 billion from China, Trump’s tariffs would generate about $900 billion of receipts per annum.
To be sure, Trump’s claim that these giant tariffs would be paid for by Chinamen, Mexicans, and European socialists is just more of his standard baloney. Tariffs are paid for by consumers, but that’s actually the hidden virtue of the Tariff Man’s favorite word.
The truth is, government should be paid for via taxation on current citizens, not fobbed off in the form of giant debts on future citizens, born and unborn. So if we are going to have Big Government at 25% of GDP rather than a 19th-century government at 3.5% of GDP, and Trump is a Big Government Man if there ever was one, better that the burden be placed on consumption, not production, income, and investment.
After all, today the “makers” get hit good and hard by the current exceedingly lopsided income tax system. Thus, the top 1% pays 46% of income taxes, while the top 5% pays 66% and the top 10% pays 76% of all income taxes. On the other end, by contrast, the bottom 50% pays just 2.3% of individual income taxes, while 40% of all families pay no income tax at all.
In any event, the math works out such that the proposed Trumpian revenue tariffs would generate about $9 trillion over the next decade, or nearly 80% of the $11.5 trillion revenue loss from drastically shrinking the income tax coverage and collection rate. So that’s a big step in the direction of fiscal solvency rather than more UniParty free lunches.
To be sure, the proper redirection of Federal tax policy would be a national sales tax or VAT levy, which could be applied to both goods and services and to domestically produced output as well as to imports. Thus, a 5% VAT on the current $20 trillion per year of total PCE (personal consumption expenditures) would generate the equivalent of Trump’s revenue tariff, while a 15% levy on total PCE could replace both the Trump tariff and the remainder of the income tax entirely.
Notwithstanding its shortcomings, however, a revenue tariff is a long overdue start in the right direction. Trump’s bold stance in favor of taxing consumption rather than income and requiring all households to bear the cost of government, not just the small number of producers at the top of the economic ladder, is clearly superior to the status quo.
Still, this sweeping change in the composition and incidence of tax policy doesn’t really put the impending fiscal disaster to bed. Not by a long shot.
If you assume Trump’s big revenue tariffs and sweeping income tax cuts and that the other Federal payroll, corporate, and excise taxes remain the same, 10-year revenues compute to just $60 trillion versus built-in spending of $85 trillion per the CBO baseline. In short, even with a giant Trumpified version of the historical revenue tariff, Trump’s budget plan would still generate $25 trillion of red ink over the next decade.
10-Year Budget Outlook with Trump Tax Cuts and Tariffs, 2025 to 2034:
- Individual income taxes with Trump cuts: $22.0 trillion.
- Trump Revenue Tariffs: $9.0 trillion.
- Existing Payroll Taxes: $20.9 trillion.
- Existing Corporate Tax Ex-Trump Cut to 15% on Manufacturers: $4.6 trillion.
- Other Existing Federal Receipts: $3.5 trillion.
- Total Federal Revenue Under Trump Policy: $60.0 trillion.
- CBO Baseline Federal Outlays: $85.0 trillion.
- 10-Year Trump Deficit: $25.0 trillion.
To be sure, Trump has promised to turn Elon Musk loose on a crusade against government waste and inefficiency, and we say more power to him. If anyone has the courage and smarts to take on the Swamp, surely Elon Musk is at the top of the list.
Then again, Trump has promised to shield 82% of the budget from any cuts at all. That’s right. Elon could huff and puff and shrink the non-exempt programs and agencies by one-third and still leave deficits in excess of $20 trillion over the next decade.
10-year Cost Of Programs Trump Has Championed, Promised Not To Cut or Can’t Cut:
- Social Security: $20.0 trillion.
- Medicare: $16.0 trillion.
- Federal Military and Civilian Retirement Pensions: $2.5 trillion.
- Veterans’ programs: $3.0 trillion.
- National Security Budget: $15.5 trillion.
- Interest On the Public Debt: $13.0 trillion.
- Total Exempt Programs: $70.0 trillion.
- Exempt Programs As % of $85 trillion CBO Baseline: 82%.
In short, even with Trump’s full revenue tariffs and assuming Elon could actually slash 33% of the non-exempt budget without closing the Washington Monument, the bottom-line math leaves little to the imagination. Spending at $80 trillion would amount to 22.7% of GDP, while Trump’s tariff-heavy revenue package would generate $60 trillion of Federal receipts over the next decade, amounting to about 17.0% of GDP.
In turn, that would leave a structural deficit of nearly 6% of GDP as far as the eye can see. And that projection assumes no recession ever again and that interest on a public debt approaching $60 trillion by 2034 would average just 3.3% across the maturity spectrum.
We will take the unders on that proposition any day of the week and twice on Sunday. That is to say, CBO’s projection of $1.7 trillion of annual interest expense by 2034 is likely understated by several trillion. Per year.
In any event, the challenge of financing these giant deficits along with $900 billion per year of Trump tariffs would be considerable. The latter alone would amount to nearly 10% of annual US consumption of consumer goods and fixed investment goods.
So if the Fed were to “accommodate” these massive Trump tariffs by running the printing presses red-hot in an attempt to compensate for lost household purchasing power, it could well trigger a burst of inflation even more virulent than that of 2021-2024.
On the other hand, were it to adhere to the correct sound money solution and refuse to “accommodate” both the massive Trump deficits and the giant Trump tariffs, bond yields, and interest rates would soar, even as the Main Street economy contracted sharply in response to a one-time 10% increase in the general price level.
Financing massive budget deficits honestly in the bond pits rather than at the Fed’s printing presses would also unleash the mother of all meltdowns in today’s insanely inflated financial markets. Trump would therefore get his tariff and some substantial reshoring of industrial production, but also a hair-curling recession on Main Street and a Bronx Cheer from the canyons of Wall Street.
Unfortunately, that’s the price America would have to pay even under Trumpian economics to purge the destructive effects of decades of UniParty spend, borrow, and print policies.
Still, we can actually think of a decidedly worse scenario. To wit, perpetuation of the UniParty status quo, which is what we would get from the Washington ruling party that replaced a failing mind in the Oval Office with an empty one on the Democratic presidential ticket.
A version of this piece appeared on the author’s site.
Brownstone Institute
Trump Takes Over and Implements Communication Freeze at HHS, CDC, and NIH
From the Brownstone Institute
By
Part of the sweep of government in the first days of the Trump administration has been a freeze on communications. The explosion has hit the whole of public health bureaucracies, which Trump personally blames in part for the meltdown of his previous term of president in his last year. The pause in operations is designed to figure out exactly what is going on.
It is certainly not the case that Donald Trump wants you to die, contrary to Paul Krugman’s claim. No longer writing at the New York Times, he reserved his rather extreme view for his Substack account.
Recall that Krugman was 100 percent for lockdowns and all the rest including the fake science behind vaccine mandates. While most of the world was in cages, he was proclaiming the dawn of the great reset. With that reversed, he has reverted to form.
What actually seems to be dying the death is the public health bureaucracy.
As the Wall Street Journal explained in their story headlined “Swaths of U.S. Government Grind to a Halt After Trump Shock Therapy:” “While glitches aren’t uncommon during the early days of presidential transitions, some longtime federal employees said the chaos seemed more extreme this week due in part to wide-spanning differences between the agendas of the previous administration and the new one. The stalled initiatives extended far beyond Trump’s cancellation of federal DEI programs.”
I seriously doubt that public opinion registers much concern.
Let’s take a look at the actions of these agencies in the pre-inauguration days before the freeze.
The Department of Health and Human Services announced on January 17, three days before the inauguration, a jaw-dropping $590 million grant to Moderna, a driving force behind global vaccination with mRNA shots during Covid. The announcement of this grant changed the fortunes of the company’s stock price, which had been in a two-year slide.
The timing alone cries out for explanation. Was this to dump largess on the deep-state partner before Trump could stop it? Or was it tacitly approved by the incoming administration in order to keep Trump’s fingerprints from it? We’ll know based on whether this goes ahead. It will certainly be a test of the agency’s future under the leadership of Robert F. Kennedy, Jr., provided he is confirmed by the Senate.
For now, it has all the earmarks of an old regime grabbing whatever it can on the way out.
Over at the CDC, which exists as part of a suite of agencies under the control of HHS, we have one last communication dating also from January 17. It was to announce the “first-ever National One Health Framework to Address Zoonotic Diseases and Advance Public Health Preparedness in the United States.”
David Bell at Brownstone has been writing about this for longer than a year. As he describes it:
“Those pushing it envision a world in which any lifeform is considered intrinsically equal worth to others. If you must choose between your daughter and a rat, the choice should weigh the probability of survival of each, or may do the least harm to other lifeforms after being saved. Within this ‘equitable’ worldview, humans become a pollutant. Ever-growing human populations have driven other species to extinction through environmental change, from the megafauna of ancient Australasia to the plummeting insect populations of modern Europe. Humans become a plague upon the earth, and their restriction, impoverishment, and death may therefore be justified for a greater good.”
The connection here to Fauci et al, and their view concerning spillover diseases from animals to humans – a major reason why they were so insistent on the zoonotic origins of Covid – is rather obvious.
In the middle of the worst part of US lockdowns, Fauci and his co-author David Morens wrote an article for Cell in which they explain that the real problem with life on earth began 12,000 years ago when “human hunter-gatherers settled into villages to domesticate animals and cultivate crops. These beginnings of domestication were the earliest steps in man’s systematic, widespread manipulation of nature.”
It’s always with the same theme. If there were fewer of us, had we never had much contact with each other, if we never dared to cultivate crops, domestic animals, store water, and move around, we could have been spared all diseases.
The real problem is what we call civilization itself, which is why the article ends with an assault on “overcrowding in dwellings and places of human congregation (sports venues, bars, restaurants, beaches, airports), as well as human geographic movement,” all of which “catalyzes disease spread.”
The only solution, in this view, is “rebuilding the infrastructures of human existence, from cities to homes to workplaces, to water and sewer systems, to recreational and gatherings venues.”
One Health, as newly embraced by the CDC, amounts to a radical transformation of the basis of social order itself, under the guidance of god-like scientists who alone know how to structure the best life for all living things, even if that comes at the expense of human flourishing.
David Bell describes this creepy strain of belief as a “cult” but it might also be described as an ideology very different from the dominant ones in the 20th century. Socialism might have proven unworkable but at least it aspired to the improvement of human life. Capitalist ideology was the same. This is something different, with more in common with the far-flung imaginings of Rousseau or the Prophet Mani who shared in common the belief that all attempts to create what we call civilization are inherently corrupting of our perfect state of nature.
This was part of the underlying philosophical infrastructure of lockdowns and vaccine mandates, not merely a public health establishment doing crazy things that happened to be captured by high-powered industrial interests. There was a dreamy and ultimately ghastly utopianism backing all of these actions, stemming from hot-house salons of government-funded science cabals where they not only refuse to speak to normal people; they have nothing but disdain for the aspirations of the common folk and their attachments to property, family, and tradition (which includes, for example, home remedies on dealing with infectious disease).
How it came to be that our main engines of public health came to be captured in whole by such a crazed ideology would require a deep and expansive investigation. Certainly, it happened gradually and largely out of the public eye, so much so that even our best investigative writers are still trying to wrap their brains around it all. Whatever this ideology is, it captured nearly the entire planet Earth in the years 2020-2023 or thereabouts and resulted in a health crisis without precedent in modern times.
Part of the result of that grand experiment was the unseating of a variety of populist leaders in the US, UK, and Brazil. This seems to have set in motion what Walter Kirn has called “a coup against a coup,” as the astonishing avalanche of executive orders reveals. The flurry of news – including a full reaffirmation of free speech, a purge of all DEI edicts, a deletion of previous dictates on Central Bank Digital Currencies, and a full hiring freeze in the federal government – has been so massive that the pundit class has been left gasping to stay on top of it all.
As for NIH, Jay Bhattacharya has been tagged to head the agency. As he awaits Senate confirmation, the acting head is Dr. Matthew Memoli, an award-winning vaccinologist who has worked at NIH for 16 years. In defiance of the regime, he argued in 2021 that “with existing vaccines, blanket vaccination of people at low risk of severe illness could hamper the development of more-robust immunity gained across a population from infection.”
Our own Fellow Bret Swanson took note of this one dissident within the Fauci ranks and celebrated his resolve to speak truth to power, in a complete takedown of evil four years ago. The doctor came under fire for daring to disagree.
Now Dr. Memoli heads the agency he defied. He remains in that position until the man once called a “fringe epidemiologist” by the previous head of NIH takes full control. This is as close to revolution and counterrevolution as you will find in a democratic society.
Something big and potentially wonderful is happening in the realm of public health, which was deployed for egregious purposes only a few years ago. It is a turning point of some sort, and one can hope that the results are consistent with the health, well-being, and freedom of everyone.
For now, there doesn’t seem to be too much in the way of public panic about the big freeze at HHS-related agencies, much less the removal of Anthony Fauci’s expensive security detail.
Brownstone Institute
The Deplorable Ethics of a Preemptive Pardon for Fauci
From the Brownstone Institute
Anthony “I represent science” Fauci can now stand beside Richard “I am not a crook” Nixon in the history books as someone who received the poison pill of a preemptive pardon.
While Nixon was pardoned for specific charges related to Watergate, the exact crimes for which Fauci was pardoned are not specified. Rather, the pardon specifies:
Baseless and politically motivated investigations wreak havoc on the lives, safety, and financial security of targeted individuals and their families. Even when individuals have done nothing wrong – and in fact have done the right things – and will ultimately be exonerated, the mere fact of being investigated and prosecuted can irreparably damage reputations and finances.
In other words, the dying breath of the Biden administration appears to be pardoning Fauci for crimes he didn’t commit, which would seem to make a pardon null and void. The pardon goes further than simply granting clemency for crimes. Clemency usually alleviates the punishment associated with a crime, but here Biden attempts to alleviate the burden of investigations and prosecutions, the likes of which our justice system uses to uncover crimes.
It’s one thing to pardon someone who has been subjected to a fair trial and convicted, to say they have already paid their dues. Gerald Ford, in his pardon of Richard Nixon, admitted that Nixon had already paid the high cost of resigning from the highest office in the land. Nixon’s resignation came as the final chapter of prolonged investigations into his illegal and unpresidential conduct during Watergate, and those investigations provided us the truth we needed to know that Nixon was a crook and move on content that his ignominious reputation was carve d into stone for all of history.
Fauci, meanwhile, has evaded investigations on matters far more serious than Watergate. In 2017, DARPA organized a grant call – the PREEMPT call – aiming to preempt pathogen spillover from wildlife to people. In 2018 a newly formed collaborative group of scientists from the US, Singapore, and Wuhan wrote a grant – the DEFUSE grant – proposing to modify a bat sarbecovirus in Wuhan in a very unusual way. DARPA did not fund the team because their work was too risky for the Department of Defense, but in 2019 Fauci’s NIAID funded this exact set of scientists who never wrote a paper together prior or since. In late 2019, SARS-CoV-2 emerged in Wuhan with the precise modifications proposed in the DEFUSE grant submitted to PREEMPT.
It’s reasonable to be concerned that this line of research funded by Fauci’s NIAID may have caused the pandemic. In fact, if we’re sharp-penciled and honest with our probabilities, it’s likely beyond reasonable doubt that SARS-CoV-2 emerged as a consequence of research proposed in DEFUSE. What we don’t know, however, is whether the research proceeded with US involvement or not.
Congress used its constitutionally-granted investigation and oversight responsibilities to investigate and oversee NIAID in search of answers. In the process of these investigations, they found endless pages of emails with unjustified redactions, evidence that Fauci’s FOIA lady could “make emails disappear,” Fauci’s right-hand-man David Morens aided the DEFUSE authors as they navigated disciplinary measures at NIH and NIAID, and there were significant concerns that NIAID sought to obstruct investigations and destroy federal records.
Such obstructive actions did not inspire confidence in the innocence of Anthony Fauci or the US scientists he funded in 2019. On the contrary, Fauci testified twice under oath saying NIAID did not fund gain-of-function research of concern in Wuhan…but then we discovered a 2018 progress report of research NIAID funded in Wuhan revealing research they funded had enhanced the transmissibility of a bat SARS-related coronavirus 10,000 times higher than the wild virus. That is, indisputably, gain-of-function research of concern. Fauci thus lied to the American public and perjured himself in his testimony to Congress, and Senator Rand Paul (R-KY) has referred Fauci’s perjury charges to the Department of Justice.
What was NIAID trying to preempt with their obstruction of Congressional investigations? What is Biden trying to preempt with his pardon of Fauci? Why do we not have the 2019 NIAID progress report from the PI’s who submitted DEFUSE to PREEMPT and later received funding from NIAID?
It is deplorable for Biden to preemptively pardon Fauci on his last day in office, with so little known about the research NIAID funded in 2019 and voters so clearly eager to learn more. With Nixon’s preemptive pardon, the truth of his wrongdoing was known and all that was left was punishment. With Fauci’s preemptive pardon, the truth is not yet known, NIAID officials in Fauci’s orbit violated federal records laws in their effort to avoid the truth from being known, and Biden didn’t preemptively pardon Fauci to grant clemency and alleviate punishment, but to stop investigations and prosecutions the likes of which could uncover the truth.
I’m not a Constitutional scholar prepared to argue the legality of this maneuver, but I am an ethical human being, a scientist who contributed another grant to the PREEMPT call, and a scientist who helped uncover some of the evidence consistent with a lab origin and quantify the likelihood of a lab origin from research proposed in the DEFUSE grant. Any ethical human being knows that we need to know what caused the pandemic, and to deprive the citizenry of such information from open investigations of NIAID research in 2019 would be to deprive us of critical information we need to self-govern and elect people who manage scientific risks in ways we see fit. As a scientist, there are critical questions about bioattribution that require testing, and the way to test our hypotheses is to uncover the redacted and withheld documents from Fauci’s NIAID in 2019.
The Biden administration’s dying breath was to pardon Anthony Fauci not for the convictions for crimes he didn’t commit (?) but to avoid investigations that could be a reputational and financial burden for Anthony Fauci. A pardon to preempt an investigation is not a pardon; it is obstruction. The Biden administration’s dying breath is to obstruct our pursuit of truth and reconciliation on the ultimate cause of 1 million Americans’ dying breaths.
To remind everyone what we still need to know, it helps to look through the peephole of what we’ve already found to inspire curiosity about what else we’d find if only the peephole could be widened. Below is one of the precious few emails investigative journalists pursuing FOIAs against NIAID have managed to obtain from the critical period when SARS-CoV-2 is believed to have emerged. The email connects DEFUSE PI’s Peter Daszak (EcoHealth Alliance), Ralph Baric (UNC), Linfa Wang (Duke-NUS), Ben Hu (Wuhan Institute of Virology), Shi ZhengLi (Wuhan Institute of Virology) and others in October 2019. The subject line “NIAID SARS-CoV Call – October 30/31” connects these authors to NIAID.
It is approximately in that time range – October/November 2019 – when SARS-CoV-2 is hypothesized to have entered the human population in Wuhan. When it emerged, SARS-CoV-2 was unique among sarbecoviruses in having a furin cleavage site, as proposed by these authors in their 2019 DEFUSE grant. Of all the places the furin cleavage site could be, the furin cleavage site of SARS-CoV-2 was in the S1/S2 junction of the Spike protein, precisely as proposed by these authors.
In order to insert a furin cleavage site in a SARS-CoV, however, the researchers would’ve needed to build a reverse genetic system, i.e. a DNA copy of the virus. SARS-CoV-2 is unique among coronaviruses in having exactly the fingerprint we would expect from reverse genetic systems. There is an unusual even spacing in the cutting/pasting sites for the enzymes BsaI and BsmBI and an anomalous hot-spot of silent mutations in precisely these sites, exactly as researchers at the Wuhan Institute of Virology have done for other coronavirus reverse genetic systems. The odds of such an extreme synthetic-looking pattern occurring in nature are, conservatively, about 1 in 50 billion.
The virus did not emerge in Bangkok, Hanoi, Bago, Kunming, Guangdong, or any of the myriad other places with similar animal trade networks and greater contact rates between people and sarbecovirus reservoirs. No. The virus emerged in Wuhan, the exact place and time one would expect from DEFUSE.
With all the evidence pointing the hounds towards NIAID, it is essential for global health security that we further investigate the research NIAID funded in 2019. It is imperative for our constitutional democracy, for our ability to self-govern, that we learn the truth. The only way to learn the truth is to investigate NIAID, the agency Fauci led for 38 years, the agency that funded gain-of-function research of concern, the agency named in the October 2019 call by DEFUSE PI’s, the agency that funded this exact group in 2019.
A preemptive pardon prior to the discovery of truth is a fancy name for obstruction of justice. The Biden administration’s dying breath must be challenged, and we must allow Congress and the incoming administration to investigate the possibility that Anthony Fauci’s NIAID-supported research caused the Covid-19 pandemic.
Republished from the author’s Substack
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