After the Federal Circuit affirmed the Court of International Trade’s invalidation of the Trump tariffs on Friday evening (in a decision that Dan and I separately analyzed on Saturday), President Trump took to Truth Social to pine about how the “Radical Left group” of judges “didn’t care” that, in the absence of the tariffs, “our Country would be completely destroyed, and our military power would be instantly obliterated.” This, the president’s story goes, is because of “the TRILLIONS OF DOLLARS we have already taken in.”
All of this is arrant nonsense. That includes the description of the seven (of eleven) judges in the majority, who include both Republican- and Democratic-appointees, and (as their opinion illustrates) are the antithesis of a “radical left group.” (The radical here is Trump, the first president in the nearly half-century history of the 1977 International Emergency Economic Powers Act (IEEPA) to use it to unilaterally impose tariffs — a taxing power that the Constitution vests in Congress, not the president.)
…..
The Justice Department represented to the Circuit that, if left in place, the tariffs would “generate between $2.3 trillion and $3.3 trillion over the budget window” — which is a decade long. That is roughly consistent with Trump Treasury Secretary Scott Bessent’s estimate of about $300 billion annually.
The U.S. defense budget is around $850 billion per annum (efforts to push it over $1 trillion appear to be running into the headwinds of mountainous debt and Washington’s inability to cut other spending). The Defense Department has proved resistant to reliable auditing, but it unquestionably controls trillions of dollars’ worth of assets. The president’s claim that it would be obliterated, and the country entirely destroyed, by the disappearance of the Trump tariff tax on Americans is complete fiction.
That is not to say that the tax isn’t steep.
Here’s the abstract of a new lecture delivered by the trade economist Elhanan Helpman:
Foreign trade has significantly contributed to global improvements in living standards, a reduction in global inequality since the mid-1990s, and the lifting of millions out of extreme poverty. These gains were supported by the rules-based international order established after World War II. However, these achievements are now under threat. Escalating trade wars risk not only causing significant economic harm to both the United States and low-income countries, but also exacerbating geopolitical tensions.
My GMU Econ colleague Bryan Caplan talks about economic growth with Cato’s Marian Tupy.
Sen. Ron Johnson (R., Wis.) deserves credit for pushing the government to return to its “pre-pandemic level of spending” (“Why I Won’t Give Up on Balancing the Budget,” Letters, Aug. 21). But any effort to review the federal budget “excluding Social Security and Medicare” is worthless. There is no hope for fiscal sustainability without reforming both programs.
Along with Medicaid, Social Security and Medicare are the largest drivers of our structural deficits. As every policymaker in Washington knows, mandatory spending on these entitlements consumes two-thirds of the budget. There isn’t enough to trim in the remaining third of discretionary spending to make a difference.
It gets worse. Estimates of the present-value costs of these programs range between roughly $100 and $200 trillion. In other words: Uncle Sam is currently in the red to the tune of one to two times the world’s gross domestic product.
Pledging to go after “waste, fraud and abuse” in discretionary spending polls well. But given the magnitude of unfunded entitlement liabilities, it amounts to rearranging deck chairs on the Titanic.
Labour is getting a tough lesson about the Laffer Curve, which warns that beyond a certain point tax-rate increases yield less revenue rather than more. The tax increases in last year’s budget are failing to narrow the deficit because they deter investment and hiring. A tax grab targeting wealthy foreigners is flopping as foreigners choose to leave.
