The Supreme Court recently heard arguments in a case that will decide whether the president overstepped his authority by invoking an old war law to justify imposing tariffs on seemingly every country and product under the sun. Though White House lawyers changed their tune in front of the justices, up till this point, one of the administration’s defenses throughout this trade war is that these tariffs are needed because they bring in substantial revenue for the country, money that could be used to help turn the tide on Social Security’s and Medicare’s fiscal outlooks.
But whether the administration actually believes this tariff revenue is “incidental” to their larger goal, the truth is these tariffs will not alter the trajectory of our national debt or entitlement programs. In many cases, it may make their outlook worse.
For the sake of the economy, SCOTUS should put an end to this abuse of power.
In their official brief to the Court, White House officials claimed that if the courts decide that the law in question, the International Emergency Economic Powers Act (IEEPA), can’t be used for unilaterally levying tariffs, the lost revenue would “lead to financial ruin.”
A spade should be called a spade, and it’s true that if SCOTUS rules against the White House, there would be a negative fiscal impact. Tax Foundation finds that the IEEPA tariffs will raise about $1.8 trillion over the next decade if they stay in place. Though Republicans once balked at tax hikes of that size, this one in particular needs to be considered in the context of the other ills these tariffs bring.
To begin, Trump’s trade war will shrink the economy by nearly 0.4 percent, per our estimates. That hit alone reduces the tariffs’ revenue potential by more than $400 billion. All in all, when you look at the revenue window for the next 10 years, even a best-case scenario leads to the IEEPA tariffs accounting for less than 2 percent of the country’s total revenue.
That amount of money is not going to be the solution to Social Security’s and Medicare’s dire outlook.
By 2034, due in part to the extension of the 2017 Trump tax cuts through this year’s One Big Beautiful Bill Act (OBBBA), the amount of debt held by the public will rise from a projected baseline of 117.1 percent to 124.6 percent. It will only fall to 122.3 percent if the IEEPA tariff revenue is fully collected over that time period.
These are astonishing, scary outlooks. Publicly held debt is set to rise to a higher share of GDP than ever recorded over the next few years, and the IEEPA tariffs would do little to move the needle. Absent any major changes, Medicare’s and Social Security’s trust funds are set to run dry by 2033.
Social Security and Medicare are funded by payroll taxes, meaning we need an active and growing workforce to help keep their wheels turning. The IEEPA tariffs would have the opposite effect: before factoring in retaliation from other countries, we estimate that these tax hikes would lead to a loss of nearly 428,000 workers.
Big problems require big solutions. And maybe it’s admirable that the president believes his trade war could improve our fiscal outlook. If the simple solution to the crisis facing Social Security and Medicare were simply more money, perhaps tariffs could be a topic worthy of debate.
But in that debate, it becomes clear that the trade-offs aren’t worth the risk.
This trade war is a jobs crusher. It’s a strain on our diplomatic relationships. And it’s one of the largest tax hikes in American history, costing the average household $1,300 per year.
The IEEPA tariffs cannot save our entitlement programs, which may be why White House lawyers backed off their revenue argument in front of the Justices, but they will be another blow to our workforce and pocketbooks. Limitations on the president’s power to unilaterally impose significant tax hikes would be a welcome decision.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
Credit: Source link
