Teasing with Tariffs: President Makes Impossible Promise

Trump’s latest promise is that the government will take $1,866 away from you in taxes and then refund $2,000 of that to you, while using the profit the government retains from that transaction to eliminate the national debt. At the same time, he wants you to believe that the entire $2,000 is actually paid by foreign countries into your pockets, not taken from your pockets until he returns it. It’s free money just for you!

Let me break it down for you:

The president promised to give $2,000 in stimulus payouts to every American, other than those with high incomes, as a “dividend” from his tariffs. He doesn’t say that all money that comes in from tariffs is, first, paid in by American businesses and consumers.

President Donald Trump on Sunday said every American with the exception of the wealthy will receive $2,000 from the revenue the U.S. has collected from tariffs.

“A dividend of at least $2000 a person (not including high-income people!) will be paid to revenue,” Trump posted on Truth Social….

“We are now the richest, most respected country in the world with almost no inflation and a record stock market price. 401Ks are highest ever,” Trump wrote. “We are taking in trillions of dollars and will soon begin paying down our enormous debt, $37 trillion. Record investment in the USA, plants and factories going up all over the place.”

“The people who are against tariffs are fools,” said the president in prefacing his remarks. Let’s see who the fool is by examining how the math checks out on the president’s promise.

The CBO says that the tariffs are expected to bring in $2.8-trillion over the next ten years. With the US now chalking up a deficit at the rate of $3.4-trillion per year, there is no way the tariffs will even cover each year’s deficit by bringing in less than that amount over the course of ten years, let alone pay down the debt.

The annual revenue from tariffs does not even offset one-tenth of each year’s current deficit, much less pay off the debt already accumulated. The president is clearly very poor at math. Trump’s original tax cuts during Trump 1.0 have always been paid for with massive deficits. Yet, somehow the president promises we are not only going to eliminate the deficit, we are going to start paying off the $37-trillion debt already accumulated AND then, on top of that, give every single American, except the rich, a nice $2,000 payment.

Now that we’ve seen it cannot even come close to eliminating the deficit, much less start paying down the debt, let’s do the math on those payments:

First, if the promise were even doable, it would only mean the president is going to tax money away from you then give it back since tariffs are clearly paid for by Americans as many American business are now telling you. (See my last Deeper Dive for numerous business quotes from businesses about how they are paying the tariffs, themselves.) Many businesses are also saying they are passing as much of those tariffs on to the consumer as they can and that they will keep finding ways to get to where they are passing on all of the tariffs.

It’s a well known fact, explained by many:

FactCheck.org explains that tariffs are collected by U.S. Customs from American importers, not foreign exporters. These costs are then passed on to consumers through higher prices.

Even the Supreme Court justices stated clearly last week that tariffs are taxes paid by Americans. So, businesses are saying it all over the place now. Fact-check sites have been saying it. Conservative Supreme Court justices are now saying it as a fact recognized by everyone, it would seem, but Trump and those working for him and those willing to believe anything he says. Nevertheless, truth never stops Trump. He continues to operate by the strategy that says you only have to repeat the big lie often enough to get people to accept it as a fact. So, he keeps saying it.

An equally obvious lie is the math involved here:

If the cutoff for “high income” is set as low as $100,000 a year, that still leaves 150-million qualifying adults. Multiply that number by the promised $2,000 per adult, and you get $300-billion in one-time payouts. With the nation bringing in $2.8-trillion in tariff revenue over a decade or $280-billion per year, the Trump government will have to pay out more than the total of all that they collected from American people and American businesses over the course of a year.

However, it is a one-time stimulus payment, so maybe they are just going to give the entirety collected over the next fourteen months back to Americans before the government starts applying the tariffs toward partial reduction of each year’s deficit.

Taking $280-billion in revenue and dividing it by $300-billion in payouts gives you a ratio that comes to this: for every $2,000 the president plans to pay out, the government will only actually be collecting $1,866 in a year’s time.

So, maybe they are going to wait until the end of the president’s term when they will have more than enough. Even so, that will mean continuing with higher deficits throughout his term than we would have without the handouts because the government’s tariff collections are a long way short every year from matching the annual deficit. They will be that much shorter if Trump gives, say, a third of the four years’ collection back. So, the promise of eliminating the deficit in order to start paying down the debt is completely impossible even without the “dividend” promised to the American people.

It looks like Trump just says whatever he wants and knows there are plenty of people willing to believe him even if finding the truth is fairly basic math. Estimates that are little more conservative say it will take 1.5-2 years to accumulate enough tariff revenue to make $2,000 payments to every adult with less than $100,000 annual income. And none of this subtracts out, first, all the costs involved in collecting and processing the tariffs for all those years and then processing the 150-million payouts in order to see how much is really netted for payout and deficit reduction.

Nor does any of it account for real-world dynamics, which say that when you increase American taxes on imported goods, people buy fewer of those goods, so the actual tariffs collected over time is less than you think it will be because people adjust to other non-tariffed goods over time to save money. THAT, after all, is supposed to be the actual objective of tariffs. In fact, that is Trump’s primary claimed objective—to drive Americans away from purchasing tariffed foreign goods by raising their price and toward domestically-produced goods that will be comparably cheaper. If that works, it means you actually collect a lot less in tariffs.

That objective by itself tells everyone open to the truth what they need to know about who pays the tariffs: If the objective is to raise the price of imported goods to where Americans prefer to buy domestic goods, then WHO is paying the tariff? That objective can only be achieved if Americans are paying the tariffs when they buy the goods. So, Trump must clearly know that foreign nations do not pay the tariffs because, if they did, tariffs would not drive any US consumption toward domestic goods. That objective is only achieved if tariffs actually do raise the price of imported goods in order to change consumer behavior.

Ah well, people, I guess know what they want to believe, and truth stops there.

Trump pumps the next massive housing bubble

Another false promise the president pumped this past week is the hope of starting 50-year mortgages to make homes more affordable, which is exactly the opposite of what a 50-year mortgage would accomplish. First, such a monster mortgage would make you a debt slave for life, as you will be paying interest to banks for fifty years! That means you will be paying a lot more in interest to banks on the price of your new home. Second, interest is front loaded in loans, so you’ll have a lot less equity after your first 10-20 years of a 50-year loan than you will have after the same amount of time over a 30-year loan.

Third, we have seen time and again that NOTHING raises the price of homes more than cheaper payments. People buy payments, not the price of a house. They buy what they can afford, and to the extent that you lower payments through lower interest or easier or longer terms, the prices of homes surge.

We’ve seen that dynamic every time the Fed has significantly lowered interest rates to reduce payments. I’m not saying lowering payments doesn’t help people up front, but it has been a proven fact, time and again, that lowered interest also raises what people are willing to pay for a home, so they bid prices up. We blew up one huge real-estate bubble that way, and now we’ve inflated another much larger one that is starting to blow up. Go to fifty-year mortgages and watch an even bigger bubble inflate and then blow up. This is bubble economics, and there is no excuse for not seeing that because we’ve had these bubbles blow up in our face, and are in the middle of such an event right now.

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