The economic trajectory of Trump’s restructuring of the US - bad this year, next year to be the start of America’s “golden age”
A while ago, I compared Trump’s pre-C19 budget with that of Biden - here:
Lots has changed since Trump was in office th first time. The damage wrought by the “haters” in the Democratic Party has been immense. Nonetheless, there are nuggets from each of the budgets that provide a few clues for 2025.
Here is a side-by-side comparison between the Trump 2019 budget and the Biden 2024 one.
Trump figures from 2019 first - then Biden on the right.
An extra 1.8 trillion bucks in outlays, met by 500 billion in receipts.
Excess government spending has inflated GDP - the resulting increase is illusory - it only happened because of profligate federal spending - it is a false reading. If the government digs a hole and fills it in again, that is not economic “growth” - it is a socialist big government stunt.
Trump is attacking the extra and useless government spending in two ways - by eliminating th wasteful spending and by unleashing DOGE.
US and foreign based investment managers will need to return much of the trillions they have invested in overseas markets and seek the higher returns, lower costs and risks from US investments!
We can hope that this eliminates the waste - but it will take time to work through the economic statistics. There will be a “recessionary” impact on the economy from this correction in waste - reducing federal spending will have this inevitable impact.
This year’s fiscal deficit is likely to exceed 2 trillion dollars - lifting national debt to 39 trillion dollars.
Economic growth is likely to be negative 2% - with inflation at around 3-4%.
That is for the fiscal year ending on 30 September 2025.
Next year is likely to be shockingly good. With “real” growth after inflation of around 4-5%. After that? Well, we shall see.
Extra government spending is also required to remove th migrant beggars that Biden and Harris shipped in. It is costing around $100,000 a year in direct and indirect costs per beggar to have them stay in the US, but it will cost $50,000 per beggar to evict them. There are at least ten million - the costs are around a trillion bucks a year while thy remain, compared to a one-off cost of half a trillo for eviction.
So far, the impact on this year’s deficit is to increase it - the trillion bucks a year for 10 million illegal migrants is not reflected in either Trump’s or Biden’s budgets - the half trillion in eviction costs is ignored also.
On the other side of the ledger, the switch to an “External Revenue Service” based on tariffs from an “Internal Revenue Service” based on taxing Americans is a food one - but has costs.
“No tax on tips and overtime” plus no tax on the elderly has consequences for revenue.
The US tax year expires on 30 September 2025, yet the tariffs will kick in on 2 April 2025 - effective for 6 months out of this tax year.
The likely tariff revenue is some fraction of the trade balance. From Brave AI:
“In 2024, the total value of U.S. exports reached a record $3.2 trillion, while imports also hit a record $4.1 trillion, resulting in a trade deficit of $1.2 trillion.”
Brave AI needs a lesson in arithmetic!
Anyway, lets go with 4.1 trillion bucks of imports paying an average rate of 20%.
That will raise 800 billion dollars BEFORE all the volume adjustments that the tariffs will force.
Make no bones about it - the surge in investment into the US will result in enormous economic activity - “growth”.
The US is a mature economy quite capable of supplying its own needs. It does not need anything from anyone and has chosen to use its economic clout and investment might to import goods from abroad.
So, here’s a better indicator to keep an eye on, rather than the GDP number.
For there to be a cultural revolution in the US, the Labour Force Participation Rate must first return to levels last seen in 2000 (67%) and then push on through to above 70% from its current level of
Labor Force Participation Rate (CIVPART) | FRED | St. Louis Fed
That is the metric to focus on over the next year or so.
Of course, the price of eggs is important - and the price of gas at the pump.
In the same way that the economy was wrecked in GDP terms, it was also wrecked in inflationary terms - prices have been inflated by corruption, waste and fraud.
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Onwards!!!
Trying to remain positive. Hope Trump is who he says he is. Says no to CBDC…looking iffy at this time. Stops Musk if he goes outside of DJT’s plan for America (if he is who he says he is…otherwise all bets off). Lots of innocent and very capable, hard-working people being affected by the major cuts. I know seems to be an oxymoron when speaking about government. But we’re losing a lot of talent, and keeping a lot of grifters. It’s all hitting close to home for quite a few.
The decision to sack the young people who hadn't completed their probationary period (in USAID?) was short-sighted. Those people do not devise the programs. They also have technical skills lacking in the upper echelons.