Photograph by Nathaniel St. Clair

Everyone in my public school third-grade class learned arithmetic. Apparently, this puts us way ahead of Donald Trump and much of the punditry. They somehow take seriously the idea that we can replace $2.6 trillion in annual income tax revenue with $280 billion in Donald Trump tariff revenue. My third-grade class all know better.

While this is absurd on its face, Donald Trump keeps repeating the idea. He draws approving nods from Republican politicians and the conservative punditry.

The arithmetic here is straightforward. We currently are running annual budget deficits of around $1.7 trillion, a bit less than 6.0 percent of GDP. The deficit, measured as a share of GDP, is projected to rise gradually over the next decade as the growing debt leads to a larger interest burden.

This is the context in which Donald Trump is saying that he wants to replace the income tax with his tariffs. This is the story on the relative size of the two taxes.

We are currently raising around $2,600 billion a year from the individual income tax. If we take tariff collections over the last three months for which there is data (Sept-Oct) and annualize the amount, it comes to around $280 billion. (This is the increment to tariff revenue that resulted from Trump’s tariff hikes. The full amount of tariff revenue would be around $360 billion a year.)

If the government relied on $280 billion in new tariff revenue to replace an income tax that pulled in $2,600 billion, almost ten times as much, it would raise the annual deficit by roughly $2,300 billion. That would push the size of the deficit to around $4 trillion, roughly 13 percent of GDP.

The government ran deficits of this size during World War II, but at no other time. The current deficit of 6 percent of GDP is already extraordinarily large. I’m about as far from being a deficit hawk as anyone around, but I would be very worried about the consequences of running deficits of 13 percent of GDP. It would almost certainly be inflationary, and it would likely lead to the sort of run on the dollar and generalized financial panic that the deficit hawks always warn about. I am certain that none of Trump’s economic advisers would advocate this sort of switch.

It is also worth noting that, contrary to what Trump seems to think, the story gets worse over time, not better. If we actually brought back manufacturing jobs to the U.S. and imports fell, there would be less tariff revenue over time. That would make the Trump budget deficits even larger.

This raises the question of whether Trump has any clue what he is talking about? Does he really not know that the income tax raises almost ten times the amount of revenue that he is getting from his import taxes (tariffs)?

If Trump is really that clueless about the basics of the federal budget, then it should be 25th Amendment time. The president doesn’t have to be a budget wonk, but he should have some idea of where federal revenue comes from. Suggesting we can replace a tax that raises $2.6 trillion with a tax that raises $280 billion indicates Trump has no clue.

Perhaps Trump is just lying, but this is the sort of question that media need to be asking. Is Trump just spewing crazy lies or is he crazy? The American people have a right to know.

One other point, if Trump actually does put up legislation to replace the income tax with his tariffs, the Democrats should all abstain. Rather than play a role in Trump’s craziness, let the Republicans all go on record saying that Trump is nuts or go ahead and wreck the economy. There is no reason for Democrats to get involved in this idiocy.

This first appeared on Dean Baker’s Beat the Press blog.

The post Trump Crazy #27542: Replacing the Income Tax with Tariffs appeared first on CounterPunch.org.

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