Never was deep and broad economic reform more urgently needed. The debt bubble is unprecedented and mammoth. Private and public debt as a share of gross domestic product (GDP) is three times higher than on the eve of the Great Depression! The federal portion has not been this high since 1945; federal interest payments will soon ruin the federal budget. Foreigners unload US dollars, the dollar may soon be worthless. What to do?
We must immediately stoke US productivity, and briskly grow out of debt. Nothing less than rapidly supercharging the economy on a par with the heyday of 1948-84 will do. Back then, annual, real (inflation-adjusted) GDP grew at about 5%. For the past 15 years, annual GDP growth has been half that, at best. Even the Trump Administration could not sustain growth above 2.5%. In any case, the Congressional Budget Office projects real GDP to grow at 1.7%, if public policies do not change.
How to supercharge the economy? Implement, I suggest, 2 or better yet 3 momentous measures, namely, a strategic tariff, a facsimile of the “American Infrastructure Bank” (AIB) and deep currency and bank reform.
To impose a strategic tariff means to tax all imports. American exporters typically face unfair tariffs, which, in turn, results in big US trade deficits with most foreign countries. Out of 700,000 products that the US trades in, only 13% involve the same tariff that the US and its trade partners apply. Another 20% of them involve higher US tariffs. 67% of them involve much higher foreign tariffs. Our biggest trade deficit is with Red China, thanks to their high tariffs.
Under the circumstances, the US should impose a 10% tariff on all imports. Such action would boost US annual, real GDP by more than 2.5%, above whatever the level otherwise would be, according to the Coalition for a Prosperous America! This means that, starting next year, US annual, real GDP would exceed 4%.
To implement the AIB is to have the US Treasury provide below-market rate loans for the repair and build out of infrastructure (eg, roads and bridges). I made the case for the AIB in the previous edition of this paper. Historically, infrastructure spending has supercharged the economy. The AIB, at full capacity, would boost US annual, real GDP by more than 3%, above whatever the level otherwise would be!
To undertake deep currency and bank reform is to reform or abolish the Federal Reserve System (the Fed). The Fed, which is owned by private interests, is surely the principal cause of our distress. It promotes speculation, far more than production. Worse, the US money supply is debt-based. Nearly all US money is the product of a loan. 40 cents out of every single dollar we spend goes to pay interest on loans, according to a recent study! We spend even more on interest, now.
How to reform the Fed? If we abolish it, what takes its place? A number of dramatic actions can improve monetary (currency and banking) policy. Besides implementing the AIB, we should reimpose stiff bank regulations. Some would revive the gold standard. Others would mimic the Republican-controlled, Civil War Congress–issue greenbacks.
How does all this relate to the 2024 elections? Trump did more for the economy from 2017-19 than Biden-Harris has done in their tenure. Trump favors a strategic tariff of 10%. Harris does not. An incoming Trump Administration would presumably do more for the economy than a Harris Administration.
A victory for Trump would not automatically result in a strategic tariff, however. The free-trade lobby is strong. The grassroots must reinforce the protectionists.
Bringing about the AIB or monetary reform or both will require grassroots involvement, as well.
The economy must not be locked down again. Private and public debt as a share of GDP grew 20% because of the 2020 lockdown.
Dr Joe Arminio is a policy analyst and native Delawarean. His think tank, The Institute for America’s Resurgence, offers a FREE 7-day course on the political-economic big picture, via CfAR21.org. He promotes the AIB via aibnow.org. He worked with the American Enterprise Institute, the Department of Defense and Sprint’s Government Systems Division. The Massachusetts Institute of Technology awarded him the Doctorate in Political Science.
