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Brownstone Institute

Trump’s 19th-Century Solution to Fiscal Disaster

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15 minute read

From the Brownstone Institute

By David_StockmanDavid Stockman 

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.

Author

David_Stockman

David Stockman, Senior Scholar at Brownstone Institute, is the author of many books on politics, finance, and economics. He is a former congressman from Michigan, and the former Director of the Congressional Office of Management and Budget. He runs the subscription-based analytics site ContraCorner.

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Brownstone Institute

If the President in the White House can’t make changes, who’s in charge?

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From the Brownstone Institute

By Jeffrey A TuckerJeffrey A. Tucker 

Who Controls the Administrative State?

President Trump on March 20, 2025, ordered the following: “The Secretary of Education shall, to the maximum extent appropriate and permitted by law, take all necessary steps to facilitate the closure of the Department of Education.”

That is interesting language: to “take all necessary steps to facilitate the closure” is not the same as closing it. And what is “permitted by law” is precisely what is in dispute.

It is meant to feel like abolition, and the media reported it as such, but it is not even close. This is not Trump’s fault. The supposed authoritarian has his hands tied in many directions, even over agencies he supposedly controls, the actions of which he must ultimately bear responsibility.

The Department of Education is an executive agency, created by Congress in 1979. Trump wants it gone forever. So do his voters. Can he do that? No but can he destaff the place and scatter its functions? No one knows for sure. Who decides? Presumably the highest court, eventually.

How this is decided – whether the president is actually in charge or really just a symbolic figure like the King of Sweden – affects not just this one destructive agency but hundreds more. Indeed, the fate of the whole of freedom and functioning of constitutional republics may depend on the answer.

All burning questions of politics today turn on who or what is in charge of the administrative state. No one knows the answer and this is for a reason. The main functioning of the modern state falls to a beast that does not exist in the Constitution.

The public mind has never had great love for bureaucracies. Consistent with Max Weber’s worry, they have put society in an impenetrable “iron cage” built of bloodless rationalism, needling edicts, corporatist corruption, and never-ending empire-building checked by neither budgetary restraint nor plebiscite.

Today’s full consciousness of the authority and ubiquity of the administrative state is rather new. The term itself is a mouthful and doesn’t come close to describing the breadth and depth of the problem, including its root systems and retail branches. The new awareness is that neither the people nor their elected representatives are really in charge of the regime under which we live, which betrays the whole political promise of the Enlightenment.

This dawning awareness is probably 100 years late. The machinery of what is popularly known as the “deep state” – I’ve argued there are deep, middle, and shallow layers – has been growing in the US since the inception of the civil service in 1883 and thoroughly entrenched over two world wars and countless crises at home and abroad.

The edifice of compulsion and control is indescribably huge. No one can agree precisely on how many agencies there are or how many people work for them, much less how many institutions and individuals work on contract for them, either directly or indirectly. And that is just the public face; the subterranean branch is far more elusive.

The revolt against them all came with the Covid controls, when everyone was surrounded on all sides by forces outside our purview and about which the politicians knew not much at all. Then those same institutional forces appear to be involved in overturning the rule of a very popular politician whom they tried to stop from gaining a second term.

The combination of this series of outrages – what Jefferson in his Declaration called “a long train of abuses and usurpations, pursuing invariably the same Object” – has led to a torrent of awareness. This has translated into political action.

A distinguishing mark of Trump’s second term has been an optically concerted effort, at least initially, to take control of and then curb administrative state power, more so than any executive in living memory. At every step in these efforts, there has been some barrier, even many on all sides.

There are at least 100 legal challenges making their way through courts. District judges are striking down Trump’s ability to fire workers, redirect funding, curb responsibilities, and otherwise change the way they do business.

Even the signature early achievement of DOGE – the shuttering of USAID – has been stopped by a judge with an attempt to reverse it. A judge has even dared tell the Trump administration who it can and cannot hire at USAID.

Not a day goes by when the New York Times does not manufacture some maudlin defense of the put-upon minions of the tax-funded managerial class. In this worldview, the agencies are always right, whereas any elected or appointed person seeking to rein them in or terminate them is attacking the public interest.

After all, as it turns out, legacy media and the administrative state have worked together for at least a century to cobble together what was conventionally called “the news.” Where would the NYT or the whole legacy media otherwise be?

So ferocious has been the pushback against even the paltry successes and often cosmetic reforms of MAGA/MAHA/DOGE that vigilantes have engaged in terrorism against Teslas and their owners. Not even returning astronauts from being “lost in space” has redeemed Elon Musk from the wrath of the ruling class. Hating him and his companies is the “new thing” for NPCs, on a long list that began with masks, shots, supporting Ukraine, and surgical rights for gender dysphoria.

What is really at stake, more so than any issue in American life (and this applies to states around the world) – far more than any ideological battles over left and right, red and blue, or race and class – is the status, power, and security of the administrative state itself and all its works.

We claim to support democracy yet all the while, empires of command-and-control have arisen among us. The victims have only one mechanism available to fight back: the vote. Can that work? We do not yet know. This question will likely be decided by the highest court.

All of which is awkward. It is impossible to get around this US government organizational chart. All but a handful of agencies live under the category of the executive branch. Article 2, Section 1, says: “The executive Power shall be vested in a President of the United States of America.”

Does the president control the whole of the executive branch in a meaningful way? One would think so. It’s impossible to understand how it could be otherwise. The chief executive is…the chief executive. He is held responsible for what these agencies do – we certainly blasted away at the Trump administration in the first term for everything that happened under his watch. In that case, and if the buck really does stop at the Oval Office desk, the president must have some modicum of control beyond the ability to tag a marionette to get the best parking spot at the agency.

What is the alternative to presidential oversight and management of the agencies listed in this branch of government? They run themselves? That claim means nothing in practice.

For an agency to be deemed “independent” turns out to mean codependency with the industries regulated, subsidized, penalized, or otherwise impacted by its operations. HUD does housing development, FDA does pharmaceuticals, DOA does farming, DOL does unions, DOE does oil and turbines, DOD does tanks and bombs, FAA does airlines, and so on It goes forever.

That’s what “independence” means in practice: total acquiescence to industrial cartels, trade groups, and behind-the-scenes systems of payola, blackmail, and graft, while the powerless among the people live with the results. This much we have learned and cannot unlearn.

That is precisely the problem that cries out for a solution. The solution of elections seems reasonable only if the people we elected actually have the authority over the thing they seek to reform.

There are criticisms of the idea of executive control of executive agencies, which is really nothing other than the system the Founders established.

First, conceding more power to the president raises fears that he will behave like a dictator, a fear that is legitimate. Partisan supporters of Trump won’t be happy when the precedent is cited to reverse Trump’s political priorities and the agencies turn on red-state voters in revenge.

That problem is solved by dismantling agency power itself, which, interestingly, is mostly what Trump’s executive orders have sought to achieve and which the courts and media have worked to stop.

Second, one worries about the return of the “spoils system,” the supposedly corrupt system by which the president hands out favors to friends in the form of emoluments, a practice the establishment of the civil service was supposed to stop.

In reality, the new system of the early 20th century fixed nothing but only added another layer, a permanent ruling class to participate more fully in a new type of spoils system that operated now under the cloak of science and efficiency.

Honestly, can we really compare the petty thievery of Tammany Hall to the global depredations of USAID?

Third, it is said that presidential control of agencies threatens to erode checks and balances. The obvious response is the organizational chart above. That happened long ago as Congress created and funded agency after agency from the Wilson to the Biden administration, all under executive control.

Congress perhaps wanted the administrative state to be an unannounced and unaccountable fourth branch, but nothing in the founding documents created or imagined such a thing.

If you are worried about being dominated and destroyed by a ravenous beast, the best approach is not to adopt one, feed it to adulthood, train it to attack and eat people, and then unleash it.

The Covid years taught us to fear the power of the agencies and those who control them not just nationally but globally. The question now is two-fold: what can be done about it and how to get from here to there?

Trump’s executive order on the Department of Education illustrates the point precisely. His administration is so uncertain of what it does and can control, even of agencies that are wholly executive agencies, listed clearly under the heading of executive agencies, that it has to dodge and weave practical and legal barriers and land mines, even in its own supposed executive pronouncements, even to urge what might amount to be minor reforms.

Whoever is in charge of such a system, it is clearly not the people.

Author

Jeffrey A Tucker

Jeffrey Tucker is Founder, Author, and President at Brownstone Institute. He is also Senior Economics Columnist for Epoch Times, author of 10 books, including Life After Lockdown, and many thousands of articles in the scholarly and popular press. He speaks widely on topics of economics, technology, social philosophy, and culture.

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Brownstone Institute

Hysteria over Robert F. Kennedy Jr.’s Promise to Make Vaccines Safer

Published on

From the Brownstone Institute

By Rebekah Barnett  

“People are reacting because they hear things about me that aren’t true, characterizations of things I have said that are simply not true. When they hear what I have to say, actually, about vaccines, everybody supports it.”

Robert F. Kennedy, Jr. has been confirmed as Secretary of the US Department of Health and Human Services.

Within hours, my news feed was populated with angsty articles hand-wringing about the future of vaccines under Kennedy, whom legacy media and the establishment are certain would confiscate life-saving vaccine programs, raising the spectre of mass waves of illness and death.

In particular, this quote from Senator Mitch McConnell (R-KY), the only Republican who voted against Kennedy’s confirmation, appeared over and over again:

“I’m a survivor of childhood polio. In my lifetime, I’ve watched vaccines save millions of lives from devastating diseases across America and around the world. I will not condone the re-litigation of proven cures, and neither will millions of Americans who credit their survival and quality of life to scientific miracles.”

Yet, I could not find one piece of mainstream coverage of this quote that mentioned the astonishing fact that 98% of polio cases in 2023, the most recent year for which we have full data, were caused by the polio vaccine.

You read that correctly. In 2023, 12 wild polio cases were recorded (six in Afghanistan, six in Pakistan), with a further 524 circulating vaccine-derived cases, mostly throughout Africa. This trend is in keeping with data from the previous several years.

An important contextualising detail, wouldn’t you think?

Source: Katie Couric on Instagram

The cause of this polio resurgence is that the world’s poor are given the oral polio vaccine (OPV), which contains a weakened virus that can replicate in the gut and spread in feces, causing vaccine-derived outbreaks.

People in rich countries get the inactivated polio vaccine (IPV), which does not contain live virus and therefore does not carry the risk of spreading the very disease it’s vaccinating against.

The World Health Organization (WHO) and vaccine-promoting organisations say that the way out of the problem is to vaccinate harder, as the argument goes that outbreaks only occur in under-vaccinated communities.

This may be well and good, but the total omission of the fact from media coverage that the goalposts have shifted from eradicating wild polio (not yet complete but nearly there, according to the WHO) to eradicating vaccine-derived polio (the main problem these days) underscores that this is why hardly anyone who knows anything trusts the media anymore.

A member of my extended family has polio. It’s nasty and life-altering and I wouldn’t wish it on anyone.

That’s why I would hope that any vaccines given would be safe – contracting polio from the supposedly preventative vaccine is the worst-case scenario, second only to death.

This is Kennedy’s expressly stated aim.

“When people actually hear what I think about vaccines, which is common sense, which is vaccines should be tested, they should be safe, everyone should have informed consent,” he said at his confirmation press conference.

“People are reacting because they hear things about me that aren’t true, characterisations of things I have said that are simply not true.

“When they hear what I have to say, actually, about vaccines, everybody supports it.”

Grown-ups who support vaccines can walk and chew gum. From the point of view of the public health establishment, the polio vaccine has prevented millions of cases and has nearly eradicated the disease.

At the same time, the world’s poorest are afflicted with polio outbreaks which we can work to prevent, and the safety of all polio vaccine products on the market should be subject to the rigorous standards applied to all other medicines.

Unless you think that poor people don’t matter, in which case the status quo might suit you fine.

Republished from the author’s Substack

Author

Rebekah Barnett is a Brownstone Institute fellow, independent journalist and advocate for Australians injured by the Covid vaccines. She holds a BA in Communications from the University of Western Australia, and writes for her Substack, Dystopian Down Under.

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