The news out of D.C. is coming fast and furious in these early days of Trump’s second administration. One thing is clear: Trump learned a few things from his first administration and has had 4 years to prepare for this, and boy, did he prepare!
With Elon Musk’s business sense and technical acumen assisting, the new administration has engaged in an intricately choreographed dance. In a carefully planned sequence, Trump has issued a flurry of executive orders, put forth a radically different new brand of cabinet nominees and department heads for confirmation, and seized access to entire systems and buildings.
In the process, he has swept aside deeply entrenched career bureaucrats – both literally and figuratively. He has shone bright lights on corruption and waste deep in the belly of the beast, while political opponents are left sputtering and spinning, unsure how to react, or if they should scurry back into the shadows.
For most Americans, this is great fun to watch. We’ve known all our lives that taxes are too high, spending is out of control, the debt is unsustainable – and that’s just the way it is and always will be.
But is it finally morning in America?
Major reforms are in the works. To call the ideas coming out of the White House right now disruptive is an understatement. Trump is aiming to dismantle entire agencies and even departments – USAID, the Department of Education, even the IRS! What a game-changer that would be! No more income taxes? No more dreading April 15?
While few Americans would miss the IRS, let’s think about this for a minute. How inflationary would such a plan be? Remember – inflation is too many dollars chasing too few goods. Taxation is one way to mop up excess dollars in the economy. Maybe it’s a BAD way, but it’s a way.
More money in everyone’s pockets combined with tariffs putting a choke hold on supply chains could be a recipe for disaster!
Consider: The income tax brings in about 50% of federal revenue. That’s roughly $2.43 trillion per year. We are $36 trillion in debt. Trump has suggested we make up the revenue with an “External Revenue Service” and revert to relying on tariffs to fund the government. It used to be that way before 1913! But currently tariffs make up only 2% of revenue, or about $21 billion. That is a pretty big gap.
The yellow sliver is tariffs. The dark blue is income taxes.
All things being equal, tariffs would need to be a rate of 65% to fully make up for ending the income tax right now. That would result in unimaginable inflation, crippling the economy.
Trump is proposing a more modest 10% tariff rate across the board. That leaves us with a $2 trillion shortfall and potentially, a lot of inflation if the deficit is made up with money printing.
Certainly, Trump is making changes on the spending side. The debt clock has added a DOGE savings ticker to the debt dashboard https://www.usdebtclock.org/ It currently stands at around $58 billion. But DOGE has a lot of work to do to get to $2 trillion. Cutting USAID saves only $50 billion. Cutting the Department of Education saves $90 billion a year. These are fractions of total spending.
So where does the money go?
The immovable objects of Social Security, Medicare, Defense and other mandatory spending together make up about 70% of the budget. Are they on the chopping block too? They almost HAVE TO BE in order for the numbers to work. How would Trump swing that politically?
The other strategy is to grow the economy. High tariffs could have the effect of reshoring American manufacturing. Decreased regulation could make the US more business friendly and bring back lots of good jobs. Our prosperity could be “Made in America” again. But would it be enough to bridge the gap? Could enough progress be made before midterm elections?
Can the U.S. Avoid an Inflationary Spiral?
If you’re an optimist, you believe these things could happen:
-Tariffs somehow generate sufficient revenue to replace income taxes.
-U.S. manufacturing magically ramps up quickly to replace foreign goods, keeping prices stable.
-Government cuts enough spending and waste to narrow the gap.
-Strong economic growth reduces the debt over time.
However, pessimists see these major threats on the horizon, leading to inflation:
-Tariffs are not enough to fund the government, leading to more borrowing or money printing.
-Businesses pass all tariff costs to consumers, creating higher prices across the board.
-Global trade retaliation cripples supply chains, hurting American companies instead of helping them.
-Government fails to cut enough spending, leading to an even worse debt spiral.
Bottom line
It all comes down to how it is executed, how strong the resistance is, and if the political will is strong enough for long enough for this to work. Trump himself has warned of short-term pain. He is not dodging or denying that economic conditions will get worse before they get better.
But how long until things get better? And what if his plan falls short – or worse – falls completely apart?
Are you an optimist? Or are you bracing for all possibilities?
At Reagan Gold Group we always hope for the best, but we also believe in helping people prepare for the worst. Right now would be a good time to diversify into precious metals before prices get out of reach. Gold is reaching new all-time highs, as we predicted they would. We also think the sky is the limit. One futures trader we spoke with is predicting $7,000 gold by 2030!
Gold can preserve your purchasing power in a powerful way, come what may. Is your portfolio ready for the wild ride the next 2-4 years will be? It’s time to diversify into gold!
Embracing the enduring appeal of physical gold and silver is crucial for Americans seeking a hedge for a long-term investment. Reagan Gold Group, with expertise in gold, silver, platinum, and palladium, excels in safeguarding assets.
Our tailored consultations ensure personalized guidance, aiding financial stability preservation. In today’s unpredictable economic climate, Reagan Gold Group specializes in assisting you with acquiring physical gold and silver, providing a FREE custom consultation to kickstart your journey.
At Reagan Gold Group , we specialize in helping you hedge against these risks by assisting you with the purchase of physical gold and silver. Our experts are ready to provide a FREE custom consultation for you to help you begin the process.
*Views and opinions expressed are those of the authors they are meant for general informational purposes only, and should not be construed or interpreted as a recommendation or solicitation. Reagan Gold Group does not provide investment tax, legal financial planning, estate, planning, or any other personal finance advice. Reagan Gold Group holds no liability for the accuracy, or timeliness of the information provided.
**Note – The Reagan Gold Group is not affiliated with the Reagan Library or the Reagan Foundation in any way. We’re just fans of Ronald Reagan and what he did for American gold ownership as president.
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