Has Trump Lost His Fear of Markets?

The other problem is the United States budget deficit, which is out of control in large part because of Trump’s 2025 tax cut, which is expected to expand the budget deficit by $4.5 trillion by 2035. Conceivably, Trump may announce some sort of spending cuts to show he’s lowering the deficit, but as with Trump’s earlier tax cuts, they will come out of the domestic discretionary budget, which is too small for any cuts to make much difference. Trump’s own Treasury department shows spending under Trump has gone up, not down, to the tune of $309 billion. The only thing Trump’s cuts to federal staffing managed to do is screw the government up; they’ve saved perhaps $53 billion, while incurring costs, according to the nonprofit Partnership for Public Service, of $71 billion. That nets out to a spending increase of $18 billion. That’s a high price to pay for a civil service less able to function.

Trump has taken cuts to Medicare and Social Security off the table, and he’s reduced somewhat the taxation of Social Security benefits. (He says he eliminated it, which is untrue.) The recent increase in Medicare and Social Security spending is driven pretty much entirely by demographic changes that can be undone only by lining elderly people up against a wall and shooting them dead. Politically, Trump has sworn off cuts to these programs, but even if he hadn’t, it’s hard to see how he could realize significant savings by cutting benefits A more practical approach would be to tax more of these benefits back by treating them the same as regular income, and also to eliminate the $184,000 income ceiling on Social Security tax. But that’s the opposite of Trump’s approach.

Both short-term and long-term, the only way to reduce the budget deficit is to tax our way out of it. Not even Democrats want to say that, but it’s true. The United States is an under-taxed country. Taxes on corporations, capital gains, and inheritance have fallen over time, and so has the top marginal income-tax rate. In 1980, the top marginal income-tax rate was 70 percent; today it’s 37 percent. As a percentage of GDP, federal tax revenues keep falling. At the start of the 21st century federal tax revenues were 20 percent of GDP. Today they’re 17 percent. When Barack Obama was president, the effective tax rate on the 400 wealthiest Americans was 30 percent. That was a scandal because it was no higher than the effective tax rate for all Americans. Today, though, the effective tax rate on the 400 wealthiest Americans has dropped to 24 percent. I’m on record opposing a wealth tax, but if we can’t find a way to tax, for instance, the income rich people live on by borrowing against their ***ets, a wealth tax will become unavoidable.