On this blog, I discuss our country’s biggest problems.  I want all Presidents to succeed because if the President succeeds, then the country succeeds.  In my opinion, President Biden failed for three reasons:  he refused to close our southern border, he allowed inflation to take off (with excessive Covid stimulus spending), and he practiced a weak foreign policy (starting with the disastrous withdrawal from Afghanistan).

Now it is President Trump’s turn.  Will he succeed or fail?

Consider: What President Trump is doing right:

• Illegal southern border crossings are at the lowest level in decades. They dropped to just over 7000 in March 2025 from frequently over 200,000 per month under Biden.

  

• Elon Musk’s DOGE (Department of Government Efficiency) is making a strong effort to cut federal spending. The Fed can’t get inflation under control by itself.  It needs fiscal restraint from the President and Congress.  We are currently running annual spending deficits of almost $2 trillion.  This must be significantly reduced and getting this done appears to be a priority for Trump.
• Trump has ordered an end to DEI (Diversity, Equity, and Inclusion) in the federal government. DEI has gone overboard in recent years.  Hiring should be primarily merit-based with perhaps some occasional affirmative action around the edges.

What President Trump is doing poorly:

• He is over-emphasizing tariffs. Free trade is supported by 84% of voters.   Tariffs amount to a tax on consumers.  They should only be used sparingly to protect fragile domestic industries, especially for national security reasons.  U.S. foreign trade consists mostly of high-level services and goods.  It is neither feasible nor desirable to restore the manufacturing of low-cost goods.

  

• He should stop attacking Fed Chair Jerome Powell.  We need a strong and independent Federal Reserve to maintain the strength and the stability of the dollar.  Trump’s attacks on Powell are making investors nervous and thereby hurting economic growth.

  

• He is creating too much controversy with poor leadership choices. He should immediately fire Pete Hegseth from the position of Secretary of Defense.  Hegseth is a borderline alcoholic.  He is lax on national security and he is continually squabbling with his staff.
• A strong foreign policy means helping Ukraine defend itself from Russian invasion. The American people strongly support helping Ukraine defend itself from Russia, as long as long as there are no American boots on the ground.  No doubt a compromise will be necessary to end the fighting.  But making too many concessions to Putin will just encourage him to invade other countries in the future.   

Conclusion.  Trump needs to focus on the basic issues of a strong economy and strong national defense.  He is partly doing this, but he is also prone to getting sidetracked on petty personnel issues that accomplish nothing and create unnecessary controversy.

In my last post, I said that excessive tariffs would be harmful to the economy.  President Trump has now announced his new tariff plan. They are not only excessive but poorly planned as well.

Consider:

• First of all, it is true that the US has roughly a one trillion dollar trade deficit with the rest of the world and also has lost manufacturing jobs. But Trump’s new protectionist age will harm American exports and erode U.S. economic leadership, both of which make the U.S. stronger and more prosperous.

  

• Trump’s tariffs are a historic tax increase of over 2%, higher than the tax increase caused by the Smoot-Hawley tariffs of 1930 that contributed to the Great Depression.
• Existing U.S. tariffs of 2.3% in 2023 are comparable to those of other rich countries: 2.7% for the European Union, 1.9% for Japan, 3.4% for Canada, 3% for China, and 1.7% for Switzerland.  In addition, the U.S. has selective high tariffs on a few particular imports as do other countries.
• Does it make sense to put 10% across-the-board tariffs on Australia and the United Kingdom which have trade deficits with the U.S?
• Trump hits Vietnam with a 46% tariff, which means that Nike will have to rethink where to make low-margin shoes. Does it make sense for the U.S. to invest in low-tech shoe-making rather than high-tech AI?
• In general, the trade balance reflects many factors, including national comparative advantage.  We sell things we are better at –  services and high-tech goods – and buy things that can be made more cheaply elsewhere.

  

• Hopefully, Trump will pay attention to this week’s 10% stock market decline, and reverse course before major damage is done.

Conclusion.  The latest round of Trump tariffs is excessive and poorly planned.  Let’s hope that he has the good sense to back off before a major worldwide recession is created.

For my Email Newsletter
Follow me on Facebook
Follow me on Twitter

Recently on this blog, I have been discussing debt, deficits, and inflation.  Not only is our national debt, at $36 trillion, much too high and growing very fast, with annual spending deficits in the range of $2 trillion, but deficit spending also tripped off inflation in 2021 which has, in turn, forced the Federal Reserve to raise short-term interest rates substantially, harming the economy.

The Trump Administration is addressing this problem well by setting up the Department of Government Efficiency (DOGE), headed by Elon Musk, to eliminate waste and inefficiency throughout the federal government.  Steady progress is being made.

Unfortunately, Trump is also imposing tariffs on other countries at breakneck speed. This is a bad idea for many reasons.  Consider:

• Global trade has made us richer.  Real wages are up 74% since the 1970s. In the 1950s, the typical American household spent more than a third of its income on food, clothing, gasoline and basic energy.  By the 1970s it was still more than a quarter.  By the 2000 aughts it was down to 13.5%.  Globalization is a large part of the story.
• Example. It pays $12 an hour to work in a T-shirt plant in South Carolina. It pays much more to work down the street at Amazon or Costco.  So why not purchase T-shirts from Guatemala where T-shirt manufacturing pays good wages?
• Manufacturing. The United States today is the second-largest manufacturing nation in the world. But we don’t have a lot of manufacturing workers because our workers are the most productive manufacturing workers in the world.  Since American manufacturing is dependent on open trade, it needs access to lower-cost raw materials and parts.
• Example: Canada. The U.S. Defense industrial base includes Canada.  To slap tariffs on stuff from Canada doesn’t make sense.
• Example: Mexico. https://humanprogress.org/scott-lincicome-an-update-on-the-trump-tariffs/ We get food from Mexico.  Does it make sense to tariff these imports and impoverish our own citizens?
• Example: China. Increased trade with China starting in 1999 caused about a million U.S.manufacturing jobs to be lost. But there were also jobs gained from lower import prices in manufacturing, jobs gained from services, and jobs gained from exports to China.
• Will tariffs raise a significant sum of revenue?  Imports make up $4 trillion toward our annual consumption of $25 trillion.  This means that tariffs will never be a broad-based consumption tax.  If tariffs are too high, there will be no imports at all.  Tariffs could bring in a maximum of $400 billion a year, whereas individual income taxes bring in $2.5 trillion a year.
• Recession? Trump’s on-and-off tariff strategy is causing much consternation around the world, especially with our democratic allies.  A recession could result, doing great damage.  A continued decrease in the consumer price index down to the desired level of 2% would be attractive if this can be accomplished without tripping off a full-blown recession.

Conclusion.  Tariffs should only be used sparingly to occasionally protect fragile domestic industries.  If Trump is going to use them as a bargaining tool, he must be very careful not to overplay his hand.  Otherwise, he will do much damage to global trade, greatly impoverishing the whole world, including the U.S.

For my Email Newsletter
Follow me on Facebook
Follow me on Twitter

The last several posts on this blog have discussed the severity of our debt problem and several different ways to address it.  Also addressed is the continuing threat of renewed inflation if annual spending deficits are not significantly reduced. 

Even more details on the severity of the problem are presented in today’s post.  Consider:

• Hoover Institution scholar, Niall Ferguson, asks the question “Debt has always been the ruination of great powers. Is the U.S. next?”  He points out that last year, the U.S. spent $1.107 trillion on defense and $1.104 trillion on debt service.  He also points out that America’s expensive welfare system will only become more costly as the population ages, making it harder to reduce the national debt.
  |
  
• The Wall Street Journal points out that Medicaid was established to help the needy – poor children, pregnant women, the elderly, and the disabled. Democrats have since expanded it by degrees into a far broader entitlement for able-bodied, working-age adults with lower incomes.  Republicans could frame their budget reform as improving the entitlement for the truly vulnerable while putting it on a fiscally sustainable trajectory.  Reforms like state block grants and per-capita caps on spending growth would do his while returning flexibility and political accountability to states for how Medicaid dollars are spent.

  

• Wisconsin Senator Ron Johnson says that fiscal sanity is possible this year.  In FY 2019, federal outlays totaled $4.447 trillion.  In FY 2020, federal outlays jumped to $6.554 trillion because of the pandemic.  From March 2020 to March 2022, the federal government spent $5.2 trillion on Covid relief.  There was no justification for maintaining that level of spending once the pandemic was over.  Yet this is what we did, spending $6.6 trillion, $6.8 trillion, $6.3 trillion, $6.1 trillion, and $6.8 trillion in FY 2020, 2021, 2022, 2023, and 2024 respectively.  President Biden’s 2025 budget proposed spending $7.3 trillion, 63.3% higher than 2019 spending.
  Using FY 1998 as a base (the first year since 1969 with a budget surplus), adjusting for inflation and population growth, and using Biden’s 2025 figures for S.S. and Medicare, established a total budget for 2025 of $5.5 trillion, which coincides with Biden’s 2025 revenue projection, thereby producing a balanced budget!

Conclusion.  The above analysis demonstrates that the lack of fiscal restraint could be the ruination of our country.  It also demonstrates how to achieve fiscal restraint by making some common-sense spending reforms.

For my Email Newsletter
Follow me on Facebook
Follow me on Twitter

Several weeks ago, I stated on this blog that Trump’s biggest challenge is to keep inflation under control.  This is an even bigger challenge today.  Consider:

• As of January 2025, inflation (the consumer price index, CPI) is back up to 3%, way above the Fed’s desired level of 2%. This means that the Fed will not be cutting interest rates any time soon and may even have to raise them again.

  

• If such a high inflation rate continues, and maybe even goes higher, Trump won’t keep his current 53% job approval rating for long.  Furthermore, his tariff plans could push inflation higher than it is already.
• A recent Government Accountability Office (GAO) report states that the Federal Government loses between $233 billion and $521 billion annually to fraud. This is what Elon Musk and his DOGE team are trying to eliminate.

  

• House Republicans last week advanced a blueprint that directs committees to find $2 trillion in savings to offset planned $4.5 trillion in tax cuts or new spending. This obligates House Republicans to shrink bloated programs like Medicaid and food stamps so that they can spend more on defense and the border.

  

Conclusion.  The Fed cannot control inflation by itself, just by raising interest rates.  It needs fiscal restraint from Congress and the President as well.  Congress is doing its part by setting a $2 trillion (ten-year) goal for cutting spending.  The President is doing his part by recruiting Elon Musk and DOGE to eliminate waste, fraud, and inefficiency in government spending.  In other words, the Republicans now in charge of the Federal Government are off to a good start in doing what is necessary to help the Fed bring inflation down to the desired 2% level.  This is critical for the success of President Trump’s second term.

For my Email Newsletter
Follow me on Facebook
Follow me on Twitter

On this blog, It Does Not Add Up, I discuss various issues such as the strength of U.S. and world democracy, the U.S. economy, and other major concerns.  The biggest problem our country faces by far is our enormous national debt, now exceeding $36 trillion, and our rapidly growing annual spending deficits, most recently $1.85 trillion for FY2024.  In a recent post, I discussed several general ways of reducing the annual deficit, such as closing tax loopholes, requiring able-bodied welfare recipients to work, and encouraging federal employee layoffs.

Now, as Donald Trump begins his second term, the budget situation has become more focused:

• Even though the unemployment rate has now shrunk to 4.1%, 42.6 million Americans still receive food stamps, similar to January 2021, at the height of Covid. This number is clearly excessive.

  

• There are now 84.6 million Americans enrolled in Medicaid, the same number as when President Biden entered office. Simply returning to pre-pandemic Medicaid spending levels would generate a savings of $1.4 trillion over a decade.

  

• Both the consumer-price index and the federal debt rose dramatically under President Biden. These are closely related very serious long-term problems.

  

• Federal workers have now been ordered to return to the office or accept an eight-month buyout by February 6.  It is estimated that at least 10% of federal employees, approximately 200,000, will accept the buyout.
• Elon Musk, the head of DOGE (Department of Government Efficiency), says that he can cut $4 billion a day from the federal budget between now and the end of September 2025, and by a total of $1 trillion for FY2026, which begins October 1, 2025.

Conclusion.  Thanks especially to tech entrepreneur Elon Musk, we can look forward to big cuts in federal spending over the next year.  This is critical for getting our national debt under control.  It is also needed to help the Federal Reserve get inflation back down to the desired 2% level. This cannot be done without the major fiscal restraint that Elon Musk is determined to bring about.

For my Email Newsletter
Follow me on Facebook
Follow me on Twitter

On this blog, It Does Not Add Up, I discuss major issues affecting our country.  For example, in my last post, I discussed the strength of democracy around the world.

Today, I write about the incredible strength of the American economy, following Michael Beckley of the American Enterprise Institute.

Consider:

• The United States is an economic powerhouse, accounting for 26% of global GDP, the same as during the unipolar moment of the early 1990s. Even the Chinese economy is shrinking relative to that of the U.S. in current dollar terms.  In reality, China’s economy is smaller than the Communist Party claims, and it is barely growing.  From 2021 to 2024, Chinese citizens illicitly moved hundreds of billions of dollars out of China, and became the fastest growing migrant group crossing the U.S. southern border.
• From 1990 to 2019, U.S. median household income rose 55% after taxes, transfers, and adjusting for inflation, with income in the bottom fifth seeing a 74% gain. Since 2019, wages for the lowest-paid decile have grown nearly four times as fast as for middle earners and over ten times as fast as top earners.
• Consider the dollar. The currency now accounts for nearly 60% of global central bank reserves. It is used in roughly 70% of both cross-border banking liabilities and foreign currency debt issuance and almost 90% of global foreign exchange transactions.

  

• Once the world’s largest energy importer, the U.S. is now the leading producer of oil and natural gas, surpassing both Russia and Saudi Arabia. European companies currently pay two to three times as much for electricity and four to five times as much for natural gas, prompting some foreign manufacturers to relocate to the U.S. Meanwhile, the huge American consumer market, equivalent to China’s and the Eurozone’s combined, pressures foreign companies and governments to align with U.S. trade policies to maintain access to the world’s most lucrative revenue source.
• The U.S. lead in global innovation further strengthens its structural power. S. firms generate over 50% of the world’s high-tech profits, whereas China captures only 6%.
• The U.S. also attracts human capital, drawing thousands of scientists, engineers, and entrepreneurs from around the world each year. Coupled with higher birthrates, the average annual influx of over a million immigrants makes the U.S. the only great power whose prime working-age population is projected to grow throughout the century.
• The decentralized U.S. system also excels at adopting and scaling innovations across industries, a capability more crucial for long-term growth than invention alone. American localities – like American businesses – face fewer constraints from central government red tape.  As a result, successful ideas tend to spread quickly.  This diffusion advantage is reinforced by the U.S. deep venture capital markets, which account for about half of the global total.
• China’s subsidy-driven, authoritarian model creates isolated pockets of innovation without enhancing productivity across the economy. China prioritizes what it thinks of as internationally important sectors, such as the electric vehicle and renewable energy industries.  But these two industries make up only 3.5% of the Chinese economy, too little to offset declines in the bloated property and construction sectors, which account for roughly 30% of GDP and have erased $18 trillion in household wealth since 2021.

Conclusion.  The U.S. economy is enormously productive, totally surpassing any other country in the world, friend or foe alike.  This creates the responsibility, and opportunity, for the U.S. to provide enlightened leadership to help other countries increase their own economic growth.  This will be the topic of a future post.

For my Email Newsletter
Follow me on Facebook
Follow me on Twitter

Lately, on this blog, I have concentrated on what I consider to be our country’s biggest problem: enormous (($1.85 trillion in FY 2024) annual spending deficits and a rapidly growing national debt. This is unsustainable and will lead to a weaker U.S. if not brought under control soon.

But there is also much good news from around the world in 2024.  Democracy is thriving!  Consider:

• Voters in over 60 countries went to the polls last year. The elections were peaceful and the results were accepted by all parties without violence and civil division.  The largest democracy in the world, India, reelected Narendra Modi as president even though his party, BJP, underperformed expectations and denied Modi the supermajority he had anticipated.   The world’s oldest continuous democracy in the world, the United States, reelected Donald Trump in an orderly, peaceful, fashion.
• It was a bad year for autocracies.  Most dramatically, Bashar al-Assad’s dictatorship in Syria was overthrown by rebels.  Russia’s invasion of Ukraine is draining its economic and military resources.  Iran’s Middle Eastern proxies Hamas in Gaza, Hezbollah in Lebanon, and the Houthis in Yemen are coming under increasing pressure from Israel.

  

• The world’s largest autocracy, China, has huge, self-inflicted, demographic and economic problems. Its recently ended one-child policy is leading not only to dramatic population decline, but also a major worker shortage.  It has an estimated 80 million empty apartment units, creating a huge financial drain.  It is unlikely to catch up with the U.S. in GDP anytime soon.

Conclusion.  The world is largely free and getting freer all the time.  Yes, there are autocracies (unfree countries) but they have major problems to deal with.  The U.S. and its democratic allies largely predominate both economically and militarily.  Free and open societies like ours will always have problems to deal with, but they are not the severe problems facing our autocratic adversaries.  We can never become complacent, of course, but we should be confident that democracy is ascendent and that our future is bright (if we can fix our debt problem).

For my Email Newsletter
Follow me on Facebook
Follow me on Twitter

I have stated many times on this blog, It Does Not Add Up, that our biggest national problem by far is the exploding national debt, now sitting at $36 trillion, and growing at the rate of almost $2 trillion per year ( $1.85 trillion for FY 2024).

My last post stated that President Trump’s greatest challenge will be keeping inflation under control.  The Federal Reserve is doing its part by keeping short-term interest rates elevated.  But large spending deficits put upward pressure on inflation, and only the President and Congress can reduce federal spending.

Here are several major ways in which to shrink our annual deficits:

• Implementing DOGE (Department of Government Efficiency).  Setting Elon Musk and Vivek Ramaswamy loose on the inefficiencies of the federal government will help a lot. For example, simply requiring federal employees to work in the office will likely lead to hundreds of thousands of resignations, thus saving tens of billions of dollars per year.  Brian Riedl, of the Manhattan Institute, thinks that several hundred billion dollars per year can be saved with increased efficiency.
• Requiring welfare recipients to work. Requiring all able-bodied welfare recipients (and without dependents) to work would also save tens of billions of dollars per year.

  

• Reducing tax expenditures. https://www.wsj.com/opinion/gop-takes-control-headed-for-a-fiscal-cliff-policy-economy-550653a5  Consider tax expenditures, which consist of various exclusions, deductions, credits, and preferences, otherwise known as tax loopholes.  According to the Joint Committee on Taxation, these expenditures annually cost $1.8 trillion in lost revenue and have grown in number from 53 in 1970 to more than 200 today.  Many need to be eliminated.

  

• Entitlement reform. Of course, reforming both Social Security and Medicare is badly needed. These are valuable programs for  retired people and need to become fiscally sustainable to survive for the long run.  The federal government is subsidizing them at the rate of $600 billion a year (and rising), which cannot last much longer.

Conclusion.  There are several ways in which big savings can be achieved in the federal budget.  The important thing is to get started doing this soon, with either one or a combination of these methods.  The survival of our great nation depends on it.

For my Email Newsletter
Follow me on Facebook
Follow me on Twitter

Kamala Harris was defeated, and Donald Trump won, primarily because of the failure of Bidenomics.  Of course, there were other issues, such as an open southern border, weak foreign policy, and woke culture, but inflation is the main reason for Trump’s victory. The working class, Trump’s main supporters, have been badly hurt by the rapid rise of inflation that has exceeded wage gains since it took off right after Biden took office in January, 2021. The consumer price index (CPI) is now down to 2.6% (October 2024), but this is not good enough, and inflation has not yet been licked. The problem, of course, is continuing huge federal deficit spending, which reached $1.8 trillion for FY 2024 just ended.

The Federal Reserve can’t control inflation by itself.  Its only tool is raising short-term interest rates which are already quite high.  Trump is apparently unwilling to reform the entitlements, Social Security and Medicare, where big savings could be found.  Furthermore, he is threatening to raise tariffs around the world, which, of course, means raising the prices that Americans pay for many basic commodities.

Inflation will not be subdued, in a sustainable way, until federal deficit spending is greatly reduced.  Trump and Republicans, in general, want to keep taxes low, and, in particular, renew the 2017 major tax reform from Trump’s first term.  This is a good idea because it will stimulate the economy and make it grow faster, thereby boosting employment and wages.  But this means that the only way to reduce the deficit is to cut federal spending.

This is where DOGE (Department of Government Efficiency), to be headed by Elon Musk and Vivek Ramaswamy, comes in:

• Simply ending remote work for the federal workforce’s 2,000,000 employees could make a big difference. 17 federal agencies had less than 25% utilization of their headquarters buildings in 2023.  Requiring all federal employees to work full-time in their assigned offices would likely lead to a huge number of resignations, saving hundreds of billions of dollars every year.
• Repealing the grossly misnamed Inflation Reduction Act would save $100 billion a year for many years to come.  Of course, it would also repeal one of Biden’s worst attempts at implementing a harmful industrial policy.

Conclusion.  To be a successful President, Donald Trump must keep inflation subdued which can only be accomplished by slashing federal spending.  His best chance of doing this is by unleashing his DOGE team, Musk and Ramaswamy, on the federal bureaucracy.  There are hundreds of billions of dollars to be saved in this way if DOGE is effective.

For my Email Newsletter
Follow me on Facebook
Follow me on Twitter