PART THREE
In Part Two as we discussed, Trump’s win and his promise to extend his 21 percent corporate tax and to levy a 10 to 20 percent tariff on foreign nations and 60 percent on China to help pay for these tax cuts with experts agreeing wouldn’t be nearly enough and would cause further budget deficits, keeping in mind the $8.4 Trillion deficit Trump “ran up” in his first term (from his 2017 corporate tax cuts from 35 percent to 21 percent), as Trump further plans to reduce his 21 percent corporate rate to 18-20 percent and to 15 percent for corporations producing completely “American Made” goods, would further increase Our National Debt by $7.5 Trillion and with our present Debt now almost $36 Trillion, Trump’s projected $7.5 Trillion makes experts fear we are getting dangerously close to $45 Trillion in Debt—roughly 180 percent of our annual GNP (2023’s being $26.894 Trillion)—the percentage overrun experts think will begin to affect our World Reserve Currency Status.
And as discussed, on tariffs, it’s one thing if employed as a retaliatory measure against those nations imposing excessive tariffs on us to force these nations to engage in freer trade and if tariffs are used sparingly and strategically in certain circumstances to protect critical industries, but if tariffs are levied as an across-the-board measure as Trump plans to do, not only will it interfere with international trade, and though importers pay the tariff, such additional costs will be “passed on” to the consumer and is estimated the typical family could pay as much as $4,000 more annually–highly inflationary to Our Economy. Plus, such tariffs are likely to hike Interest Rates back up!! And with nations counter-imposing tariffs of 10 to 20 to 60 percent starting a “trade war”, this would also hurt our exports!!
NOW It’s clear, Trump’s tariffs have their drawbacks, but if done IN THE RIGHT WAY and used as a bargaining tool and “opening ploy” to gain important concessions such as INITIALLY imposing tariffs to reduce or eliminate tariffs on our exports making for a freer trade environment or where certain nations such as China to avoid tariffs set up manufacturing centers in other countries such as Mexico to import from there or getting foreign corporations, in lieu of tariffs being levied on their imports to instead relocate here, then paying federal income tax and employing American workers.
Also, these tariffs or more importantly the THREAT of imposing such tariffs OR THE PROMISE TO ELIMINATE TARIFFS can ALSO be used to tackle our next big problem we face, Our Rising $36 Trillion National Debt which if not controlled, could cause Our Dollar to lose its status as the World’s Reserve Currency.
And as noted—To keep Our Dollar as the World’s Reserve Currency we must keep Our Dollar in demand and in use GLOBALLY by as much international trade as possible.
And to further this, if an option were given to foreign importers (importing goods, raw materials and/or parts for assembly and manufacture here), by purchasing Treasury bonds versus paying a tariff, this would ALSO help with the financing of our annual budget, National Debt, accompanying Debt servicing costs AND BE NON-INFLATIONARY!!!
Again, we especially need to do this as in addition to domestic institutional investors such as banks, retirement funds, etc., nations around the world, big purchasers of Our National Debt, are now mostly buying less for one reason or another—concern about Our Rising National Debt as seen as “getting out of control” or investing in their own countries and infrastructure as they further modernize. And because of these diminished bond purchases by foreign nations, having foreign importer-corporations purchasing Treasury notes with 10 percent of their sales would help offset this loss of bond sales from foreign governments.
Also, as noted, Annual Debt servicing costs on our $36 Trillion Dollar National Debt per the yields we pay on outstanding Treasury bonds, is now $870 Billion–more than our Annual Defense Budget of $800 Billion!!
But, as stated, if foreign importers are purchasing bonds along with domestic corporations qualifying for a less than 21 percent tax rate, The Treasury Dept. would not have to be so reliant on domestic bond purchasers (as banks, retirement funds, etc.) and on foreign governments and as a consequence, the Treasury would NOT have to raise yield rates to attract buyers and would certainly be in a better position to even LOWER THEIR YIELDS as they build up reserves to finance government operations and pay-out obligations THEREBY LOWERING DEBT SERVICING COSTS!!!
And, again, these corporations, both foreign and domestic, would make a modest profit from such Bond Purchases and if extra capital was needed, they could easily resell these bonds at hardly a loss.
And finally, this strategy would ALSO allow our Federal Reserve to shrink its Balance Sheet, which is currently $7 Trillion “in the red”. This from all money it had to “pump” into our system to help Our Economy cope, survive and recover from the effects of The Pandemic. And “zeroing out” our Balance Sheet makes the Dollar stronger helping maintain its status as The World’s Reserve Currency.
