It looks like we will be receiving a $2000 check from the tariff revenue. As much as I like the idea of receiving money, many Conservatives prefer the revenue to go towards the National Debt. Let’s talk about these concepts.
The current National Debt is around $38 trillion. It is about 120% of the GDP, and the interest payment alone is close to $1 trillion per year. Some economist argues that it can never be paid off. In fact, the National Debt has been climbing steadily, even with President Trump in office.
The Congress still has the power of the purse. For the past two decades, Congress has failed to pass a budget many times. We haven’t had one since 2018. They just spent and continued to pass Continuous Resolutions, increasing the National Debt year after year.
Specifically, the federal government receives $4.6 trillion in tax revenue. But they have been spending $6.8 trillion yearly. Aside from the interest payment of about $1 trillion, the federal government still spends over $1 trillion that they do not have. How?
Via treasury bonds. The treasury issues bonds, the Federal Reserve (a private bank) prints the money, and various entities purchase these bonds. But who buys these bonds?
The pension systems (including PERSI) hold collectively 12% of the Treasuries. Insurance companies and other banks hold 11%. Individuals and corporations hold 9%. Foreign nations, at about 29%.
Intergovernmental transfer (such as Social Security) funds 20%. And the Federal Reserve buys the rest that are not sold, which adds up to 20%. These are the holders of our Treasury bonds.
We are struggling to make the interest payments. Frequently, we issue new bonds just to make interest payments. Congress has no desire to pay off the National Debt.
So, how do we deal with the situation? There are four basic ways to deal with it: Default, Increase Taxes, Inflation, and grow the Economy.
In 2011, Obama contemplated making lower interest payments. S&P lowered the credit rating from AAA to AA+. The result was devastating; he backed off. Defaulting was never considered again.
Raising taxes is equally bad. The economy will suffer. The citizens will also suffer.
Inflation is, as explained by many economists, another form of taxation. Under Biden, the official inflation rate was 5%, peaking at 9.1% in 2022. Under Trump, the inflation rate is officially reported at 2%. Certainly, more palatable, but it exists nonetheless.
President Trump’s approach to the massive debt is to grow the economy. Yes, he reduced the government regulations, but he is also bringing back industrial production via tariffs. He calls that Rehoming. If he wanted to raise more tax revenue, perhaps he could redo the tax codes. He did not. He rehomed via tariffs. This explains why the critics were wrong about our economy spiraling downward under Trump’s tariffs.
So, America is enriched under the new tariffs, with a proposed plan of each taxpayer receiving $2000. Shouldn’t that amount go towards Debt Payment?
Perhaps. But the President’s goal is long-term. Far beyond his presidency, perhaps to the next few decades. To achieve his goal, he wants the industry to return to America. He also wants a more vibrant economy. He is banking on the fact that $2000 to us will be a significant stimulus that will more significantly ignite the economy.
Locally, what can we do to help? The above discussion is on the national scene. How can we help at the State and Local levels? Perhaps the sentiment of more spending, while disguised as charity and compassion, comes from Washington. But if we are to save our nation, we will need to live thriftily.
Another way to say it is for governments (Federal, State, Local) to stay within their role. The proper role of government… to be maintained.
