Brownstone Institute
Trump’s 19th-Century Solution to Fiscal Disaster
From the Brownstone Institute
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
Martin Kulldorff, Sunetra Gupta, Jay Bhattacharya. Authors of the Great Barrington Declaration
From the Brownstone Institute
“At some point in summer of 2020, I decided—what is my career for? If it’s just to have another CV line or a stamp, I’ve wasted my life—that I would speak no matter what the consequences were.”
Many years ago, I was at the wedding of a good friend, a guy who everyone seemed to like. He was/is humble, considerate, kind, and down to earth. I remember telling his mother while at the wedding that I would tell anyone that, “If you don’t like him, then the problem is you.”
I also feel that way about Stanford health economist Jay Bhattacharya. Jay’s nomination by President-elect Trump to be Director of the National Institutes of Health has been a long time coming and is a hopeful signal that national health research policy is headed in the right direction.
Jay was right about all the big things during the Covid pandemic and was an important counter to the destructive hubris of lockdown and mandate-promoting public health leaders and scientists in the US. Along with Martin Kulldorff and Sunetra Gupta, Jay took enormous personal and professional risks in drafting the Great Barrington Declaration in October of 2020. In response to the highly age-stratified mortality of Covid-19 and with the threat of serious collateral damage of continuing lockdowns, school closures, and mandates, the GBD instead promoted the policy of focused protection for vulnerable elderly and infirm people while allowing young and healthy people to live their lives.
The virus was going to infect everyone eventually and establish herd immunity, and there was no evidence that a vaccine (none approved at the time) would stop that natural process. The big question was how to deal with a natural disaster without making the situation much worse. Thus, the debate was focused protection versus unfocused protection—sheltering everyone regardless of their risk of mortality or serious disease until the entire population could be vaccinated with a vaccine of unknown efficacy and net benefit.
At least that’s the debate that should’ve happened. Unfortunately, it didn’t. Jay and his GBD coauthors were attacked, threatened, and slandered. When Jay’s research group published a study showing that the seroprevalence of Covid-19 in Santa Clara County in California was much higher than previously believed, it destroyed the delusion that the virus could be eliminated, that containment was at all possible. Many people didn’t want to hear that, and Jay was subjected to numerous attacks in the media, including a defamatory article in BuzzFeed claiming he was funded by dark money and implied he used questionable methods because he was biased toward the study’s outcome.
The fact that he shortly thereafter authored a paper showing very low seroprevalence in Major League Baseball franchises wasn’t enough to prove his objectivity. The message put forth by the public health establishment would simply not allow any dissent or debate. The policy needed to drive The Science™, and lower-case science could not be allowed to drive the policy.
I signed the Great Barrington Declaration the day it was published on October 4th, 2020. I had seen, and was greatly impressed by, interviews of Jay by Peter Robinson in March and April of 2020 and was heartened by Jay’s calm display of knowledge and humility. Jay described in one of these interviews the uncertainty surrounding the number of people infected and the claims being made by experts like Anthony Fauci regarding the infection fatality rate:
They don’t know it and I don’t know it. We should be honest about that. And we should be honest about that with people who make these policy decisions when making them. In a sense, people plug the worst case into their models, they project two to four million deaths, the newspapers pick up the two to four million deaths, the politicians have to respond, and the scientific basis for that projection…there’s no study underlying that scientific projection.
When asked about the potential for collateral damage to lockdowns, “It’s not dollars versus lives, it’s lives versus lives.” An understanding of the responsibility to avoid collateral harm of lockdowns was essential yet was in extremely short supply. Jay was attacked for this nuanced message. He got emails from colleagues and administrators telling him that questioning the high infection fatality rate was irresponsible. Yet, someone had to do it. However, the interviews went viral, because Jay gave millions of people something they didn’t have and desperately needed. He gave them hope.
As the year went on, Jay became the face of the opposition to unfocused protection, appearing in countless interviews and writing countless articles. He became an advisor to Florida Governor Ron DeSantis, who vowed to not lock down the people of Florida again after an initial wave of closures. When waves of Covid inevitably hit Florida, Stanford students papered the campus with pictures of Jay next to Florida death rates, implying Jay’s nuanced message was responsible for the deaths of thousands of people. When the age-adjusted mortality rate of Florida ended up being rather average compared to other states, including lockdown and mandate-happy California, no one apologized.
YouTube censored a public forum with Jay and Martin Kulldorff and Governor DeSantis, where they made claims about the hazards of continuous lockdowns, school closures, and mandates that months before wouldn’t have been at all controversial. After the GBD was published, Jay and Martin were invited to the White House by Covid advisor Scott Atlas to discuss the idea of focused protection with President Trump. Despite that meeting, the political battle continued to be an uphill fight.
The response of federal officials was shameful. Fauci and White House Covid Advisor Deborah Birx boycotted the meeting. Then NIH Director Francis Collins called for a “swift and devastating takedown” of the GBD’s premise and called the authors “fringe epidemiologists.” There simply was no appetite at the highest levels for a nuanced message or any debate whatsoever. Media coverage of Jay and other Covid response critics continued to be toxic.
Yet Jay’s appearances and message continued to inspire millions of people and give them hope. I began writing in support of focused protection and against the constant doom-saying that was harming everyone, especially children. I met Jay in the fall of 2021 because of my writing, at a conference organized by Brownstone Institute. “I think we are making a difference,” he said after shaking my hand. Like many other people he had inspired to take a stance against Covid hysteria, I needed to hear that.
The next day, Jay was preparing to give his speech in front of a small crowd in the ballroom, and I sat next to him while he reviewed his notes during the previous speaker’s talk. Although he was dressed in a suit and tie, when glancing down, I noticed Jay had a hole in his dress shoe. This truly wasn’t about money or even status. He was simply doing what he believed was morally right.
Later on, Jay helped spearhead a couple of Covid-related projects I was also involved in (I was there largely due to his influence). First was the Norfolk Group, which produced a resource document for the US Congress titled “Questions for a COVID-19 Commission” and the second was Florida’s Public Health Integrity Committee formed by Governor DeSantis and led by Florida Surgeon General Joe Ladapo. Both groups attempted to bring accountability for the US public health response, and I believe they were successful in spotlighting just how wrong and harmful lockdowns and mandates were for the very public they were supposed to help.
During the initial Norfolk Group meeting, Jay often talked about the moment of no return, “crossing the Rubicon,” as he put it, the moment that each one of us made a conscientious decision to stand up against the mob. He later recalled in an interview with Jordan Peterson: “At some point in summer of 2020, I decided—what is my career for? If it’s just to have another CV line or a stamp, I’ve wasted my life—that I would speak no matter what the consequences were.”
The world has benefitted from Jay’s crossing of the Rubicon. His nomination, after years in the wilderness and on the “fringe” of public health and health policy, restores a sense that there is in fact justice in the world. Now he moves on to the significant task of reforming health research policy. We should be cheering him on all the way.
And if you don’t like Jay, then the problem is you.
Republished from the author’s Substack
Author
From the Brownstone Institute
Politico reports that RFK, Jr. plans to ban fluoridation, and the work is already underway. Multiple news outlets repeated this story, yet none of them checked the evidence.
According to the CDC, adding fluoridation to water supplies was among the 20th century’s top ten public health achievements.
“a cornerstone strategy for prevention of cavities in the US It is a practical, cost-effective, and equitable way for communities to improve their residents’ oral health regardless of age, education, or income.”
The CDC states that fluoridated water keeps teeth strong and reduces cavities by about 25% in children and adults.
To validate this statement, the CDC refers to two studies. The first, is a meta-analysis of 20 studies. Eleven studies examined the effectiveness of self- or clinically applied fluoride, and of the nine that examined the effectiveness of water fluoridation none were RCTs, and all were cross-sectional studies. Also, the review, which wasn’t systematic, included adults and no children. The conclusion was limited to suggesting fluoride effectively prevents caries in adults of all ages.
The second study was a Cochrane review. Notably, most studies (71%) were conducted before 1975, when fluoride toothpaste was widely introduced.
The review concludes that little contemporary evidence evaluates the effectiveness of water fluoridation in preventing caries. The observational nature of the studies, the high risk of bias, and the lack of generalisability to current lifestyles limit confidence in the size of the effect estimates.
The review goes on to say that insufficient information exists to determine whether initiating a water fluoridation program changes levels of tooth decay across socioeconomic status. No studies that met the review’s inclusion criteria investigated the effectiveness of water fluoridation in preventing tooth decay in adults.
RFK, Jr. says he would advise the water districts using fluoridation that a lot of science says safety studies still need to be done. RFK, Jr. considers fluoride an industrial waste. He also thinks a federal court ruling could speed up the end of fluoridation in the US.
A judge ordered the US Environmental Protection Agency (EPA) to undertake a risk assessment. Judge Edward Chen found fluoridation could cause developmental damage and lower IQ in children at the levels found in drinking water.
Following this judgment, four water systems, including Salt Lake City’s provider, have stopped or suspended fluoridation due to the ruling.
At the TTE office, we searched for updated evidence published in the last decade, including 32 reviews. A word of caution: the overworked staff at the TTE office is currently unable to assess the evidence fully.
Dental Caries (tooth decay)
A 2021 review of ten studies on Brazilian populations reported that water fluoridation effectively prevents dental caries in children younger than 13 years, even with the widespread use of fluoridated toothpaste. A further review of fluoride for under-fives reports the evidence supporting oral fluoride supplementation for caries prevention is limited and inconsistent.
The WHO reports fluoride intake has both beneficial effects – in reducing the incidence of dental caries – and negative effects – in causing tooth enamel and skeletal fluorosis following prolonged high exposure.
Potential Harms
Reviews include an assessment of dental fluorosis, which affects individuals of all ages, with the highest prevalence below age 11. A further review reported that in 6-18-year-olds, at a water fluoride level of less than 0.7 parts per million, dental fluorosis occurred in 13% (95% CI: 7.5-18%) of the children. Above two parts per million dental fluorosis prevalence rose to 98% (95% CI: 96‒100%). In some regions, the amount of fluoride in the water represents a public health problem as it exceeds national and international regulation levels.
Reviews also assessed an association with hypothyroidism and children’s intelligence. Regarding neurological disorders, the evidence was inconclusive, and the authors call for epidemiological studies to provide further evidence regarding the possible association. A call for evidence that is repeated for establishing whether there is an association with Hip Fracture Risk.
Reviews have also assessed the potential correlation with increased blood pressure, association with chronic kidney disease, and risk of fluoride contamination in groundwater and its impact on the safety and productivity of food and feed crops.
The Impact of Stopping Fluoride
A systematic review, including six cross-sectional design studies, indicated that fluorosis significantly decreased following either a reduction in fluoride concentration or the cessation of adding fluoride to the water supply.
A systematic review of 15 studies identified methodological considerations for designing community water fluoridation cessation studies. These studies would permit an assessment of the effects of cessation on dental caries and the impact on reducing harm.
So, Where Does This Leave RFK, Jr.?
Beware of the swift condemnation of anyone who asks questions. Experts will espouse that fluoride is well-tested, it definitively or significantly decreases caries, and it has no association with any harm—all without reference to the evidence. Furthermore, the argument is lost when an individual who puts forward questions about healthcare exposures is referred to as a denialist.
RFK, Jr. rightly asks questions about an intervention based on evidence going back to the 1930s. In the meantime, there have been growing concerns about harm and little contemporary evidence evaluating the effectiveness of water fluoridation in preventing caries. So, stopping fluoride in the context of epidemiological evaluations isn’t far off the mark.
This post was written by two old geezers who regularly clean their teeth, and remain overworked and apolitical.
Republished from the author’s Substack
Authors
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