Trump’s Economic Nationalism Can Restore Fiscal Sanity

President Trump’s announcement about the creation of the Department of Government Efficiency (DOGE) to be jointly directed by entrepreneurs Elon Musk and Vivek Ramaswamy has created much excitement about the potential for reducing regulation, bureaucracy, and government waste. DOGE has also brought forth a renewed interest in restoring federalism.

With the creation of DOGE, President Trump has an opportunity to address the out-of-control spending and the $36 trillion national debt that represents both an economic and national security threat.

David M. Walker, who served as the former U.S. Comptroller General and chair of the Federal Fiscal Sustainability Foundation, recently testified before the House Budget Committee and warned that a 70 percent chance exists that the nation will be in a debt crisis within three to five years.

The $36 trillion debt does not include unfunded liabilities from entitlement programs, and some estimates show that the debt could increase to $60 trillion by 2034.

Already the national debt is above 100 percent of GDP and interest payments alone will start crowding out other priorities in the budget.

“In fact, net interest payments are already the third largest component of federal spending, behind only Social Security and Health (which excludes Medicare),” wrote David Herbert, a Senior Research Fellow at the American Institute for Economic Research.

Further, Herbert noted that “the United States spent more money in the 2023 fiscal year servicing the debt than on national defense.”

The other economic consequences of a debt crisis include high inflation, slower economic growth, and true austerity budget cuts. It will also impact states because Uncle Sam provides substantial amounts of federal funding to the states.

Will states be prepared when federal funds have to be reduced or eliminated as a result of a debt crisis?

For too long policymakers have neglected to address the spending crisis. President Trump now has an opportunity to address the national debt and begin to lower spending.

DOGE is just one part of the solution. Republicans in Congress will also have to rediscover their fiscal conservatism. Congress must also act and help to lower spending and work with President Trump on a pro-growth economic agenda.

Renewing or making the Tax Cuts and Jobs Act (TCJA) permanent is one essential part of this pro-growth agenda. Critics will argue that the TCJA led to deficits and that renewing them will create further deficits. The problem is not with the TCJA, but rather with the uncontrolled spending.

Tax cuts, while important, are not the only policy. President Trump must work to reduce the regulatory burden and to unleash America’s energy production and potential, which also includes ending the roadblocks to responsible mining operations.

Finally, President Trump during the campaign repeatedly stated his policy preference for protective tariffs. A strategic tariff could potentially not only help with the President’s economic agenda, but the revenue obtained from tariffs could be used to lower taxes.

The most important fiscal policy tool will be to address spending. President Trump and Congress must work together and begin to lower spending. This should also include serious consideration of a spending limitation or balanced budget requirement to force Congress to control their spending.

From Coolidge to Trump

Finally, President Trump should follow the example of President Calvin Coolidge. Coolidge regarded “a good budget as among the most noblest monuments of virtue.” Coolidge believed in “economy in government,” and although he believed in lower tax rates, he understood that spending had to be addressed first.

The Coolidge economic policy of reducing spending, paying down the national debt, and lowering tax rates also included limiting immigration and using protective tariffs. These were all policies that Coolidge utilized to unleash one of the most productive economies in our nation’s history.

The conservatism and economic nationalism of Coolidge should serve as a guide for the Trump administration.

President Trump has an opportunity to not only reverse the course on this dangerous spending trajectory, but also help to restore constitutional principles such as federalism.

READ MORE:

The Only Path Leading All the Way Out of Our Inflation Quagmire

Time to Put Our Fiscal House in Order

John Hendrickson serves as Policy Director for Iowans for Tax Relief Foundation.

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