Will Trump's Tariffs Work?

I don't know, but America's economy was going down the wrong path

By Chuck Warren

America needs an economic reset, and Trump is doing it. Is this the right reset? I don’t know.

All economists believe that tariffs are bad for the economy. Everyone who attended a college economics or political science course was taught the danger of tariffs. So, if these tariffs work, we will have to burn every economic textbook in the world. But if they don’t, it’ll be a mistake to revert to the status quo ante. We will have to find another solution because the economic numbers have been average to bad for a long time.

First, of course, is our national debt problem. We are paying more interest on the debt than on defense. For the first time in U.S. history, U.S. federal debt ($36 trillion) is larger than the GDP ($30 trillion). In other words, we owe 20% more than we produce every year.

This is not sustainable. As our debt grows, we will have to increase taxes and abruptly cut benefits when interest on our debt goes up. And that will destroy the economy and create a lot of elder poverty like the 1930s.

This is a two-part problem. The obvious issue is that we spend too much. But the other problem is that we take too little revenue because the economy is not growing enough. Real economic growth—that is, growth adjusted for inflation—has consistently been 3% or lower. In the 1990s, it used to be over 4%.

Low growth also means fewer jobs and a slow increase in wealth and income.

Now, people will tell you that the unemployment numbers are very low. Which is true on a spreadsheet, however two points:

First, part of that was Biden/Harris putting government hiring on steroids. More Government jobs were brought into our economy during Biden's economic stewardship.

Second, a better indicator is the labor force participation rate. It has been steadily declining. At the turn of the century, it peaked at 67.5%. Now it’s 62.5%. A 5% difference is a lot. It means that between 8 to 9 million people have become so discouraged by the economy that they are not even looking for jobs anymore.

This is costing America more than half a trillion dollars in wealth and between $100 to $200 billion in tax revenue every year.

Another problem is the gap in growth. Since the 1980s, incomes, adjusted for inflation, have grown for everyone. But for low-paying jobs, that growth has been 17%. The more you earn, the faster your income grows. The growth rate is 21% for the lower-middle class and 24% for the upper-middle class. And high-wage earners’ incomes have grown 46%.

Everybody is getting richer, but not at the same pace, not even close. And it gets worse.

The biggest problem is probably upward mobility. Once upon a time in America, you could be anyone and become anyone. This is no longer the case. It’s very difficult to climb the income ladder once you enter middle age.

39% of people in their 30s are in the same economic class as 10 years ago. 49% of people in the 40s are in the same class as 10 years ago. And 60% of people in their 50s are in the same class as 10 years ago.

If you are a low-wage or lower-middle-class worker in your 40s, there’s only a 50% chance that you’ll enter the middle class.

None of these numbers look good. We need an economic reset. Let’s see if the tariffs work (give them short leash). If they don’t, we will have to think of something else. But we cannot continue the ways of the past two decades, that the lower you go on the income bracket, the less likely it is that your life gets better.

We used to be a country where immigrants would come here and become middle-class with comfortable lives. Forget about immigrants. Today, even Americans cannot move up the ladder because our economy is becoming stagnant like Europe.

Note: the opinions expressed herein are those of Chuck Warren only and not his co-host Sam Stone or Breaking Battlegrounds’ staff.