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August 8, 2018 | Trump’s Worst Idea: Paying Off National Debt with Tariffs

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

Trump’s heart may be in the right place when he plays hardball with our trading partners, but he left little doubt on Wednesday that his brain is out to lunch on tariff math. His notion that revenues from sizable new import levies could pay off the national debt is as pernicious and lacking in common sense as Alan Greenspan’s statement that inflated home values constitute ‘wealth’.  The Fed chairman has a PhD in economics, so it’s understandable why he would make such a ridiculous statement (along with another that purported to describe a U.S. capital investment boom at a time when household savings growth was in fact negative).  But Trump is a businessman and therefore supposedly able to do the math.

33% Tariff on All Imports Would ‘Work’

Instead, the hard left and its flagship newspaper, the New York Times, did it for him, making him look like a yokel. The Times estimated that even if much higher import duties had no effect on U.S. consumers’ appetite for foreign goods, the extra revenues would not begin to produce a budget surplus large enough to pay off a national debt currently at $21 trillion and slated to grow by $800 billion in 2018. To merely offset the latter sum via trade policy alone, noted the Times, Trump “would need to impose a more-than 33 percent tariff on $2.34 trillion in imports — which is to say, every single good the United States imported last year.”

Numbers aside, only the economically benighted could want to see the U.S. Government running huge surpluses, since that would be tantamount to socking the private sector with huge new taxes. Most of it would be a direct offset against consumption — if not dollar for dollar, then by at least enough to put the U.S. economy in deep recession. One hopes Trump was just shooting off his mouth, since, if he’s serious, his take on the use of tariffs is the most deflationary idea ever put forth by an American president.

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August 8th, 2018

Posted In: Rick's Picks

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