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
A Potpourri of the World’s Unexposed Scandals
From the Brownstone Institute
By
How many genuine, shocking – and unexposed – scandals actually occurred in the last four years? To partially answer this question, I composed another of my List Columns.
The Most Epic of Scandals Might Be…
The world’s most epic scandal might be the massive number of citizens who’ve died prematurely in the last four years. This scandal could also be expressed as the vast number of people whose deaths were falsely attributed to Covid.
My main areas of focus – “early spread” – informed my thinking when I reached this stunning conclusion: Almost every former living person said to have died “from Covid” probably did not die from Covid.
The scandal is that (unreported) “democide” occurred, meaning that government policies and deadly healthcare “guidance” more plausibly explain the millions of excess deaths that have occurred since late March 2020.
My research into early spread suggests that the real Infection Fatality Rate (IFR) of Covid should have already been known by the lockdowns of mid-March 2020.
If, as I believe, many millions of world citizens had already contracted this virus and had not died, the Covid IFR would be the same, or perhaps even lower, than the IFR for the common flu – said to be 1 death per 1,000 infections (0.1 percent).
Expressed differently, almost 100 percent of people who contracted this virus did not die from it – a fact which could and should have been known early in the “pandemic.” The fact this information was concealed from the public qualifies as a massive scandal.
Evidence That Would ‘Prove’ This Scandal
Furthermore, one does not need early spread “conjecture” to reach the conclusion that only a minute number of people who were infected by this virus later died from Covid.
After April 2020, a researcher could pick any large group or organization and simply ascertain how many people in these groups later died “from Covid.”
For example, more than 10,000 employees work for the CDC. About 10 months ago, I sent an email to the CDC and asked their media affairs department how many of the CDC’s own employees have died from Covid in the past three-plus years.
This question – which would be easy to answer – was never answered. This example of non-transparency is, to me, a massive “tell” and should be “scandalous.”
To be more precise, if the CDC could document that, say, 10 of their employees had died from Covid, this would equate to a disease with a mortality risk identical to the flu.
My strong suspicion is that fewer than 10 CDC employees have died from Covid in the last four years, which would mean the CDC knows from its own large sample group that Covid is/was not more deadly than influenza.
I’ve performed the same extrapolations with other groups made up of citizens whose Covid deaths would have made headlines.
For example, hundreds of thousands if not millions of high school, college, and pro athletes must have contracted Covid by today’s date. However, it is a challenge to find one definitive case of a college or pro athlete who died from Covid.
For young athletes – roughly ages 14 to 40 – the Covid IFR is either 0.0000 percent or very close to this microscopic fraction.
One question that should be obvious given the “athlete” example is why would any athlete want or need an experimental new mRNA “vaccine” when there’s a zero-percent chance this disease would ever kill this person?
The scandal is that sports authorities – uncritically accepting “guidance” from public health officials – either mandated or strongly encouraged (via coercion) that every athlete in the world receive Covid shots and then, later, booster shots.
Of course, the fact these shots would be far more likely to produce death or serious adverse events than a bout with Covid should be a massive scandal.
More Scandals
Needless to say, all the major pediatrician groups issued the same guidance for children.
In Pike County, Alabama, I can report that in four years no child/student between the ages of 5 and 18 has died from Covid.
I also recognize that the authorized “fact” is that millions of Americans have now “died from Covid.” However, I believe this figure is a scandalous lie, one supported by PCR test results that would be questioned in a world where investigating certain scandals was not taboo.
Yet another scandal is that officials and the press de-emphasized the fact the vast majority of alleged victims were over the age of 79, had multiple comorbid conditions, were often nursing home residents, and, among the non-elderly, came from the poorest sections of society.
These revelations – which would not advance the desired narrative that everyone should be very afraid – are similar to many great scandals that have been exposed from time to time in history.
Namely, officials in positions of power and trust clearly conspired to cover up or conceal information that would have exposed their own malfeasance, professional incompetence, and/or graft.
This Might Be the No. 1 Scandal of Our Times
As I’ve written ad nauseam, perhaps the most stunning scandal of our times is that all-important “truth-seeking” organizations have become completely captured.
At the top of this list are members of the so-called Fourth Estate or “watchdog” press (at least in the corporate or “mainstream” media).
In previous articles, I’ve estimated that at least 40,000 Americans work as full-time journalists or editors for mainstream “news organizations.” Hundreds of MSM news-gathering organizations “serve” their readers and viewers.
In this very large group, I can’t think of one journalist, editor, publisher, or news organization who endeavored to expose any of the dubious claims of the public health establishment.
When 100 percent of professionals charged with exposing scandals are themselves working to conceal shocking revelations…this too should qualify as a massive scandal.
To the above “captured classes” one could add college professors and administrators, 99 percent of plaintiffs’ trial lawyers, 100 percent of CEOs of major corporations, almost all elected politicians, and, with the exception of perhaps Sweden, every one of the public health agencies in the world, plus all major medical groups and prestigious science journals.
Or This Might Be Our Greatest Scandal
Yet another scandal – perhaps the most sinister of them all – would be the coordinated conspiracy to silence, muffle, intimidate, bully, cancel, demonetize, and stigmatize the classes of brave and intelligent dissidents who have attempted to reveal a litany of shocking truths.
The Censorship Industrial Complex (CIC) is not a figment of a conspiracy theorist’s imagination.
The CIC is as real as Media Matters, News Guard, The Trusted News Initiative, the Stanford Virality Project, and the 15,000-plus “content moderators” who probably still work for Facebook.
Government officials in myriad agencies of “President” Joe Biden’s administration constantly pressured social media companies to censor content that didn’t fit the authorized narrative (although these bullying projects didn’t require much arm-twisting).
Here, the scandal is that the country’s “adults in the room” were identified as grave threats to the agenda of the Powers that Be and were targeted for extreme censorship and punishment.
When people and organizations principled enough to try to expose scandals are targeted by the State and the State’s crony partners, this guarantees future scandals are unlikely to be exposed…which means the same unexposed leaders are going to continue to inflict even greater harm on the world population.
This Scandal Is Hard to Quantify
Other scandals are more difficult to quantify. For example, it’s impossible to know how many citizens now “self-censor” because they know the topics they should not discuss outside of conversations with close friends.
This point perhaps illustrates the state of the world’s “New Normal” – a now-accepted term that is scandalous if one simply thinks about the predicates of this modifier.
It should be a scandal that the vast majority of world citizens now eagerly submit to or comply with the dictates and speech parameters imposed on them by the world’s leadership classes.
The “New Normal” connotes that one should accept increasing assaults on previously sacrosanct civil liberties.
What is considered “normal” – and should now be accepted without protest – was, somehow, changed.
As I routinely write, what the world has lived through the past four-plus years is, in fact, a New Abnormal.
This Orwellian change of definition would qualify as a shocking scandal except for the fact most people now self-censor to remain in the perceived safety of their social and workplace herds.
The bottom line – a sad one – might be that none of the above scandals would have been possible if more members of the public had been capable of critical thinking and exhibited a modicum of civic courage.
As it turns out, the exposure of scandals would require large numbers of citizens to look into the mirror (or their souls) and perform self-analysis, an exercise in introspection that would not be pain-free.
It’s also a scandal our leaders knew they could manipulate the masses so easily.
Considering all of these points, it seems to me that the captured leadership classes must have known that the vast majority of the population would trust the veracity of their claims and policy prescriptions.
That is, they knew there would be no great pushback from “the masses.”
If the above observation isn’t a scandal, it’s depressing to admit or acknowledge this is what happened.
To End on a Hopeful Note
What gives millions of citizens hope is that, belatedly, more citizens might be growing weary of living in a world where every scandal cannot be exposed.
Donald Trump winning a presidential election by margins “too big to steal” is a sign of national hope.
Mr. Trump nominating RFK, Jr. to supervise the CDC, NIH, and FDA is definitely a sign of hope, an appointment that must outrage and terrify the world’s previous leadership classes.
For far too long, America’s greatest scandal has been that no important scandals can be exposed. Today, however, it seems possible this state of affairs might not remain our New Normal forever.
Republished from the author’s Substack
Brownstone Institute
Freedumb, You Say?
From the Brownstone Institute
By
“Authorities have attacked, detained, prosecuted, and in some cases killed critics, broken up peaceful protests, closed media outlets, and enacted vague laws criminalizing speech that they claim threatens public health”
Didn’t give much thought to freedom until four years ago, at age 63. Freedom was just there, like the water surrounding a goldfish. And then the Covid-19 pandemic blew in, the world locked down, and admonitions to “stay the ‘$^#&’ home” blazed through social media. No freedom was too important to discard in the name of public safety: jobs, family businesses, artistic endeavours, public meetings, social connections that kept despair at bay, all took a backseat to the grim business of saving grandma (who ended up getting Covid anyway). No discussion of moral or practical trade-offs, no pushback from the press, nothing. It felt wrong to me on a cellular level.
Apparently I was the only one in my middle-class liberal circle to harbour misgivings about this astonishing new world. If I tried, ever so timidly, to articulate my concerns on Facebook or Twitter, the online warriors shot back with a string of epithets. “Go lick a pole and catch the virus,” said one. “Crawl back into your cave, troglodyte,” said another. And my all-time favourite: “You’re nothing but a mouth-breathing Trumptard.”
From the get-go, I perceived Covid as more of a philosophical problem than a scientific one. As I wrote on more than one occasion, science can inform our decisions, but not dictate them. What ultimately powers our choices are the values we hold. I saw Covid as a morality play, with freedom and safety cast as the duelling protagonists, and it looked like safety was skipping to an easy victory.
It was a heady time for the health bureaucrats, whose increasingly arcane rules betrayed a naked impulse to control: the Canadian high-school students required to use masks on both their faces and their wind instruments during band practice, the schoolchildren forced (for hygiene reasons) to study on their knees for hours in an Alaska classroom, the “glory-hole” sex advised by the British Columbia Centre for Disease Control. The lack of public pushback against these absurdities heightened my awareness of the fragility of our freedoms.
One of the earliest memes to surface during the pandemic was “muh freedumb.” The locution became a shorthand for a stock character – a tattooed man wearing camo gear and a baseball cap, spewing viral particles while yelling about his rights. A selfish idiot. The memes kept coming: “Warning, cliff ahead: keep driving, freedom fighter.” “Personal freedom is the preoccupation of adult children.” Freedom, for centuries an aspiration of democratic societies, turned into a laughing stock.
Eventually, pro-freedom voices began trickling into the public arena. I wasn’t alone, after all. There were others who understood, in the words of Telegraph writer Janet Daley, that the institutional response to Covid-19 had steamrolled over “the dimension of human experience which gives meaning and value to private life.” Lionel Shriver decried how “across the Western world, freedoms that citizens took for granted seven months ago have been revoked at a stroke.” And Laura Dodsworth brought tears to my eyes when she wrote, in her 2021 book A State of Fear, that she feared authoritarianism more than death.
Once the vaccines rolled out, the war on freedom of conscience went nuclear. If you breathed a word against the products, or even the mandates, you were “literally killing people.” The hostility towards the “unvaxxed” culminated in a Toronto Star front page showcasing public vitriol, splashed with such sentiments as: “I honestly don’t care if they die from Covid. Not even a little bit.”
This, too, felt viscerally wrong. I knew several people who had refused the vaccine, and they all had well-articulated reasons for their stance. If they didn’t fully trust the “safe and effective” bromide recycled by all government and pharmaceutical industry spokespeople, I could hardly blame them. (And I say this as someone who writes for Big Pharma and got five Covid shots.)
One of the most deplorable casualties of Covid culture was freedom of expression, a core principle in the United Nations’ Universal Declaration of Human Rights. Experts speaking publicly about the harms of lockdown faced systematic ostracism from mainstream media, especially left-wing news outlets. By early 2021, Human Rights Watch estimated that at least 83 governments worldwide had used the Covid-19 pandemic to violate the lawful exercise of free speech and peaceful assembly.
“Authorities have attacked, detained, prosecuted, and in some cases killed critics, broken up peaceful protests, closed media outlets, and enacted vague laws criminalizing speech that they claim threatens public health,” the group wrote in a media release. “The victims include journalists, activists, healthcare workers, political opposition groups, and others who have criticized government responses to the coronavirus.”
But what about misinformation? Doesn’t it kill people? Newsflash: misinformation has always existed, even before TikTok. It’s up to each of us to sift the credible folks from the cranks. The best defence against misinformation is better information, and it’s the policy wonks’ job to provide it. Modern science itself depends on this tug-of-war of ideas, which filters out weaker hypotheses and moves stronger ones ahead for further testing.
Besides, misinformation comes not just from cranks, but from “official sources” – especially those tasked with persuading the public, rather than informing it. Remember when Rochelle Walensky, former director of the Centers for Disease Control and Prevention in the US, asserted that “vaccinated people do not carry the virus?” Or when Anthony Fauci maintained that getting vaccinated makes you a “dead end” in the chain of transmission? I rest my case.
The marketplace of ideas is like a souk, with a lot of hollering and arguing and the odd snatched purse – and that’s exactly how it should be. It’s an ingenious and irreplaceable process for getting to the truth. There are few ideas too sacrosanct to question or too ridiculous to consider. That’s why, unlike just about everyone in my left-leaning circle, I take no issue with Elon Musk’s shakedown of the old Twitter, now the Wild West of X.
Under Musk’s algorithms, my feed has become a true philosophical souk, with wildly disparate views smashing into each other, leaving me to sift through the rubble in search of a gold nugget or two. Love him or hate him, Musk offers a much-needed counterweight to the ideological lockstep in much of the mainstream media. And when it comes to free speech, Musk has put his money where his mouth is: when media personality Keith Olbermann recently hopped on X, where he boasts a million followers, to call for Musk’s arrest and detainment, Musk made no move to censor him. Works for me.
While the “old normal” has thankfully returned to our daily lives, save the odd mask in a shopping mall or subway car, the stench of censorship that blew in with the pandemic has yet to dissipate. An obsession with disinformation permeates the zeitgeist, spurring lawmakers in several Western countries to censor the flow of thoughts and ideas that gives a free society its pulse.
We cannot excise personal freedom from a democratic society, even in the interests of the “public good,” without poisoning the roots of democracy itself. Article 3 of UNESCO’s 2005 Universal Declaration of Bioethics and Human Rights states this plainly: “The interests and welfare of the individual should have priority over the sole interest of science or society.” In our post-pandemic reality, the statement seems almost quaint. Nonetheless, it expresses an enduring truth: that a democracy must never discard the idea of freedom – even in a pandemic.
Freedom desperately needs a comeback from its current incarnation as an expendable frill. In my own small way I’m trying to make this happen: never much of an activist before Covid, I’m now part of a small group preparing to launch a Free Speech Union in Canada, modelled after the highly successful one in the UK. The organisation will offer legal advice to individuals facing censorship, cancellation, or job loss because of their words. I look forward to supporting people caught in this anti-freedom web, including those whose words I heartily disagree with.
My newfound respect for free speech is also what propels me to keep talking about Covid. The response to the pandemic exceeded the bounds of public health, and we need to expose the forces that drove it. Here’s Daley again: “The world went crazy. There is no other way to account for what was an almost nihilistic dismantling not just of particular liberties and rights, but of the very idea of liberty.” We can’t let it happen again.
Republished from Perspective Media
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