Tariffs aren’t helping the US deficit because they are generally bad policy. The US trade deficit is an accounting issue. The US spends/consumes far more than it produces (hence why the fiscal deficit is so high). Other countries fill the gap by producing goods and selling them in the US.
It’s a structural issue that tariffs alone won’t “solve.”
Debt is the arithmetic average of previous deficits, so let's talk deficits.
Deficits are the algebraic sum of revenues and expenditures, so let's talk revenues and expenditures.
Expenditures raise or reduce future national income according to whether their NPV > 0 or not.
Regardless of the NPV of the expenditures, the resources for them comes from less investment or less consumption in some other part of the economy. My guess is that the borrowed dollar more likely cam out of reduced investment than the taxed dollar, so it we are interested in growth of the economy, we should prefer taxes to deficits.
Putting the NPV rule together with the tax vs deficit guess yields an nice rule of thumb:
Keep deficits less than the amount of expenditures with NVP >0
Please help educate politicians to these simple principles.
Tariffs aren’t helping the US deficit because they are generally bad policy. The US trade deficit is an accounting issue. The US spends/consumes far more than it produces (hence why the fiscal deficit is so high). Other countries fill the gap by producing goods and selling them in the US.
It’s a structural issue that tariffs alone won’t “solve.”
100%
Debt is the arithmetic average of previous deficits, so let's talk deficits.
Deficits are the algebraic sum of revenues and expenditures, so let's talk revenues and expenditures.
Expenditures raise or reduce future national income according to whether their NPV > 0 or not.
Regardless of the NPV of the expenditures, the resources for them comes from less investment or less consumption in some other part of the economy. My guess is that the borrowed dollar more likely cam out of reduced investment than the taxed dollar, so it we are interested in growth of the economy, we should prefer taxes to deficits.
Putting the NPV rule together with the tax vs deficit guess yields an nice rule of thumb:
Keep deficits less than the amount of expenditures with NVP >0
Please help educate politicians to these simple principles.
For more thoughts:
https://thomaslhutcheson.substack.com/p/income-wealth-and-debt
https://thomaslhutcheson.substack.com/p/socia-insurance-20
https://thomaslhutcheson.substack.com/p/fiscal-policy-and-everything-else
https://thomaslhutcheson.substack.com/p/cold-war-and-economics
https://thomaslhutcheson.substack.com/p/dollars-and-deficits
https://thomaslhutcheson.substack.com/p/debtpocalypse