The hagiography of Donald Trump has started. The one below by the very evil Stephen Miller should be a wake-up call as to what lies immediately ahead. This dude is among the nastiest of the immigrant-howlers and border “invasion” propagandists, and he is heading straight for a high berth in the Donald’s government in waiting.
Needless to say, if he succeeds in duping Trump into launching a massive multi-million person deportation drive—complete with nation-wide midnight raids and swelling internment camps—right out of the gate on January 20th, the second Trump Administration will be stillborn.
On the one hand, such a misguided action would hammer tens of thousands of small businesses which employ 8.5 million illegal aliens in labor intensive industries across the length and breadth of the land, and which workers currently pay upwards of $100 billion per year in taxes. At the same time, a sweeping outbreak of litigation and Congressional intervention would also ensue, fostering bitter political polarization and legislative and judicial combat far more intense than what has already materialized to date.
Yes, there are undoubtedly a few thousand criminals who have been released into the interior under Washington’s absurd “parole” system, but those can be targeted as a matter of prioritized regular law enforcement. What is not remotely needed, however, is the arrest and deportation of millions of economic migrants who are filling the yawning gaps in America’s worker-hungry economy.
These hard-working folks at construction sites, warehouses, chicken-slaughtering plants, fast food joints, landscaping operations etc. are “illegal” only because Federal law requires them to violate an ancient Federal statute in order to get arrested, scheduled for an asylum hearing and paroled into the economy, waiting months and years for their hearings and adjudication.
This is Big Government statism run wild. In fact, if there were a decent sized immigration quota of say 500,000 per year for unskilled workers versus the current ludicrous cap of 10,000, none of these 8.5 million workers would be “illegal” or standing in the path of the Donald’s impending raids. To the contrary, they would have gotten a green card long ago and many of them would have already earned their citizenship in the regular way.
Yet here is Miller’s over-the-top valorization of Donald Trump, implying that the very gods of history have chosen him to thwart a foreign “invasion” that is nothing of the kind; and which actually represents the free market trying to balance labor supply and demand by working around the idiotic obstacles posed by the Washington politicians.
The electoral landslide achieved by @realDonaldTrump is not only the single greatest win in American Political history but in the modern history of civilization. Nothing else even comes close.
This is unparalleled, unmatched and unrivaled. He defeated the Bush Dynasty, Clinton Dynasty, Cheney Dynasty, Obama Dynasty, Biden Dynasty and the entire corrupt machine behind Kamala Harris.
He defeated every sinister Marxist prosecutor, every vile hoax, every DOJ witch hunt, every communist persecution, every illegal act of censorship and surveillance, and the ruthlessly politicized and weaponized justice system.
He defeated the corrupt legacy media, the political class, the donor class, the pundit class. He defeated not one but TWO Democrat nominees and their rigged primary. He defeated the corrupt Democrat Congress. He defied death itself and survived multiple assassination attempts. Trump did the impossible over and over and over again. THE BIGGEST VICTORY EVER SEEN. No comparison.
To be sure, much of the above describes the consequences of Tuesday’s election. The Cheney’s, Bush’s, Biden’s, Obama’s and the insufferable shills of the mainstream media all got their comeuppance, and a much deserved opportunity to pout and lick their wounds.
But for crying out loud. It wasn’t Donald Trump the super-politician, savior of the American Way and Horatio-at-the-Bridge who single-handedly and by force of will brought about Tuesday’s sweeping repudiation of UniParty rule. It was, instead, soaring gas and grocery prices which caused them to pull the GOP lever—a punishing, 40-year high inflation surge that was, ironically, caused by the Donald’s own lockdowns and spend, borrow and print madness of 2020, as we demonstrated yesterday.
So the question recurs. If Biden’s “bad” economy was largely the aftermath of the Donald’s bacchanalia of spending and stimmies was the Donald’s purported “good” economy all that it’s cracked-up to be?
In a word, no. Real economic growth during Obama’s second term averaged 2.43% per annum, while the growth rate was 2.31% per annum during Trump’s first 3.25 years before the Lockdowns hit in Q2 2020. What these figures convey, therefore, is not a break-away boom under the Donald, but a sub-par but continuous expansion of the post-Financial Crisis business cycle that reflected the resilience of America’s market economy, not the policy palaver and machinations emanating from either incumbent of the Oval Office.
In fact, we do not propose to supply a magnifying glass to examine the graph below, but even then its damn evident that there is no way to tell when the Obama Administration ended and the Trump pre-lockdown years began. There flat out was no semblance of a boom on the Donald’s watch, and, actually, a growth rate even before the madness of the Lockdowns and stimmies that was just 75% of the 3.0% average for all Presidents between 1954 and 2016.
Real Final Sales Of Domestic Product, Q4 2012 to Q1 2020
Moreover, if the Greatest Economy Ever is a figment of the Donald’s reckless imagination, the question then becomes what might be expected under the far more challenging and fraught conditions which will prevail in January 2025 and beyond?
Stated differently, what is likely to happen when the next Trump Administration slams the already faltering, debt-ridden US economy with the double-whammy of a suddenly shrunken labor supply due to mass deportations, coupled with a massive increase in demand?
The latter, in turn, is owing to the already towering public debt increases that are baked into the cake under existing UniParty policy, which would then be drastically compounded by the Donald’s sweeping tax cuts and the massive spending increases for defense and border control which he has also promised.
Needless to say, Trump spent the campaign slicing and dicing the Federal income tax nearly as fast as he served up fries at the McDonald’s drive-thru window in late October. So doing, he 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.
As it happens, however, those items alone would generate a revenue loss of $9 trillion over the next decade, but in the final weeks of the campaign he also proposed to exempt firefighters, police officers, military personnel and veterans from the Federal income tax, as well. This was self-evidently an appeal to the “first responders” constituencies.
Like in the case of most attempts to buy votes, however, the fiscal cost is not inconsiderable. To wit, we estimate that relieving first responders from the Federal income tax would cost another $2.5 trillion in revenue loss over 10 years.
That’s because 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, candidate Trump thus tossed out promises to cut income taxes by $11.5 trillion over the next 10-year budget window. And yet his hagiographers claim that he is not a regular politician!
In any event, these sweeping reductions which would amount to upwards of 34% of CBO’s estimated baseline income tax revenue of $33.7 trillion over the next 10-year 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 (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, the Donald did tender an off-the-spectrum idea to at least partially fund the even greater fiscal madness than he accomplished the first time around. To wit, scrapping the income tax entirely in favor of taxing consumption via stiff 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.”
Actually, however, 19th century America was even smarter than the Donald 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 the Donald may be directionally correct in wanting to tax consumption rather than income, but, as usual, he was off by about seven orders of magnitude when it comes to the size of the Federal budget that needs be financed.
Pursuant to his 21st century version of the revenue tariff, Trump 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, the Donald’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 19th century government at 3.5% of GDP, and the Donald is a Big Government Man if there ever was one, better that the burden be placed on consumption—not production, work, 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% pay 66% and the top 10% pay 76% of all income taxes. On the other end, by contrast, the bottom 50% pay 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 seeming 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 taxes 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.
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 the Donald’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, the Donald’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, the Donald has promised to turn Elon Musk lose 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, the Donald 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 the Donald’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 the Donald’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 trillions. 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.
Needless to say, 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. The Donald would therefore get his tariff and some substantial re-shoring of industrial production, but also a hair-curling recession on main street and a Bronx Cheer from the canyons of Wall Street.
As to the inflation-battered constituencies who tendered an economic protest vote for Trump on Tuesday, not so much. Under the Donald’s impending plan to massively shrink the labor supply and massively increase consumer demand at the same time, what lies ahead is punishing interest rates and a deep and prolonged period of stagflation that even the wizards at the Fed will be powerless to counteract.
So there is every reason to believe that by 2028 the marginal constituencies who re-elected the Donald this time will be ready for still another “student body left” pivot next time. That’s because in the interim the myth of the Greatest Economy Ever will have been destroyed in daily living color by the colossal failure of the Donald’s half-assed theory of economics.
Reprinted with permission from David Stockman’s Contra Corner.
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