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The U.S. Faces a Growing Economic Challenge

Alright, everyone—things are getting even stranger. Today’s discussion is both amusing and deeply serious, as it highlights a critical issue the U.S. is grappling with. The core challenge? Shifting financial responsibility from the government to the private sector.

The Push to Reduce Government Spending

To his credit, Benson acknowledges that national debt is spiraling out of control and is even willing to risk a U.S. recession to address it. He has emphasized the unprecedented levels of government spending outside of wartime or recession, pushing for a course correction: reducing government spending, deleveraging the public sector, and re-leveraging private businesses. His plan involves spending cuts, lower interest rates, and deregulation of the banking system—ideas he recently outlined at the Economic Club of New York.

The Unavoidable Problem of Mandatory Spending

While this may seem like a solid strategy, there’s a fundamental flaw: the U.S. government has unavoidable financial obligations. In 2024, the federal budget stood at $6.9 trillion, with mandatory spending—such as Social Security and major healthcare programs—accounting for $4.1 trillion. Adding interest on the national debt pushes compulsory expenditures to $5 trillion, leaving a $2 trillion gap that requires borrowing. Can the private sector realistically fill this void?

The White House’s Ineffective Economic Plans

The White House’s current approach doesn’t truly solve the issue—it merely shifts money around without addressing the underlying question: Where will the funds come from? Take Trump’s proposed tax cuts, for example. If enacted, they could cost the U.S. economy an additional $7.6 trillion over the next decade, adding at least $700 billion to the deficit annually until 2035. How does Trump plan to cover this shortfall? Tariffs? That’s a nonstarter.

The Tariff Myth and Consumer Burden

While exporters might absorb a fraction of tariff costs, the bulk of the burden will fall on U.S. consumers. Even in an unrealistic scenario where foreign exporters bear the entire tariff load, Trump's tariffs on China, Mexico, and Canada would generate just $1.3 trillion over a decade—far from enough to balance the budget. In reality, American households and importers will bear most of the cost, shifting wealth from Main Street to government coffers.

Radical Tax Proposals and Their Hidden Costs

And just when you think it couldn’t get any stranger—it does. The government has already made questionable moves, like pushing people to invest in Tesla stock. But Trump’s next proposal is even more extreme: eliminating federal taxes for individuals earning under $150,000 annually. While this may sound like a boon for consumers, it raises an obvious question: Who will cover the revenue shortfall?

The “Global Membership Fee” Fantasy

Billionaire investor Lutnick suggests a radical idea—having other countries "pay a membership fee" to access the U.S. market. According to him, since the U.S. is the world’s biggest consumer, global economies should foot the bill for America’s tax cuts. He envisions the U.S. as an exclusive club where nations like China, Canada, and Mexico must pay for the privilege of selling their goods. But how much? $100 million a year? $10 billion? More?

The Reality: Countries Are Moving Away

This proposal exposes a fundamental issue: the U.S. cannot realistically balance its budget through such an approach. Countries are already shifting away from heavy dependence on the U.S. market. China, for example, has been rerouting exports to emerging markets like Turkey and Brazil, with trade surging over 100% in 2023 alone. Mexico and Vietnam are also absorbing more Chinese goods, reducing reliance on U.S. trade.

America's Trading Partners Are Diversifying

Even America’s biggest trading partners are diversifying. The European Union, while still economically tied to the U.S., is stimulating its own economy while the U.S. attempts to reduce its deficit. In time, this shift could weaken America's leverage in global trade. Mexico and Canada, whose trade deficits with the U.S. are relatively minor, are equally crucial to the American economy—meaning the U.S. can’t simply dictate terms.

Tariffs Will Hurt American Consumers Most

Ultimately, the idea of a global "membership fee" is unrealistic, but the economic consequences for the U.S. are very real. Tariffs won’t primarily affect foreign exporters—they will hit American consumers the hardest. Average households could see an annual cost increase of $1,200, with lower-income families suffering the most—losing up to 2.7% of their earnings. With rising costs on essential goods, particularly those from China, the economic pain will be widespread.

The Risk of an Inflationary Shock

And if Trump follows through with his reciprocal tariff policies in April, the U.S. could face another inflationary shock—one that could lead to economic instability and even market downturns.

The Bottom Line: America’s Economic Challenges Are Worsening

In short, America’s economic challenges are far from solved. Instead of addressing fundamental issues, current proposals risk making them even worse.

Over reliance on Tariffs and Risky Assumptions

Besson and Trump are making bold assumptions, expecting exporters to absorb the costs of tariffs and shield American consumers from the impact. However, history suggests otherwise. During the Federal Reserve’s FOMC meeting, Powell made another risky bet—claiming that inflation caused by tariffs would be “transitory” and short-lived. This statement is dangerous, as it leaves the U.S. economy vulnerable. If inflation surges unexpectedly, the Fed may be forced to maintain high interest rates for much longer than anticipated.

The Extreme Risks of Trump’s Zero-Tax Proposal

While lower taxes sound great in theory, Trump’s proposal to eliminate federal taxes entirely is unrealistic. Cutting taxes to zero without compensatory revenue is pure wishful thinking. Over the next decade, this plan could cost the government anywhere from $10 trillion to $15 trillion. Removing $1 to $1.5 trillion in annual revenue could shrink the GDP by as much as 4%, creating an economic crisis. If Trump proceeds with this policy, the government will have to find an alternative source of funding—or risk essential services grinding to a halt.

The Inevitable Outcome: More Borrowing and Debt

To cover the revenue shortfall, Besson will have no choice but to take drastic action—something even he might find distasteful: issuing bonds and borrowing money from global markets. This would put the U.S. back on Treasury Secretary Janet Yellen’s well-worn path of excessive borrowing. The Federal Budget Committee has already warned that if Trump enacts this plan, the national debt could soar from 100% to 160% of GDP by 2035.

The Global Consequences of Rising U.S. Debt

A skyrocketing U.S. debt poses a major risk not just for America but for the entire global economy. If the U.S. defaults or inflates its way out of the crisis, it would trigger massive money printing, further weakening the dollar. Since central banks, governments, and investors worldwide hold trillions in U.S. assets, a devaluation would spark a chain reaction. Global markets could enter a currency devaluation war, hitting export-driven economies the hardest. Meanwhile, for everyday consumers, this means one thing: a dramatic loss of purchasing power.

Trump’s Desperate Attempt to Fix an Impossible Problem

Despite the chaos, Trump’s policies stem from a desperate attempt to eliminate deficits—a problem the U.S. economy has been addicted to since at least 2008. This explains the flood of conflicting economic strategies that seem to contradict each other. According to economist Steve Hanke from Johns Hopkins University, the U.S. could be one of the biggest losers in this ongoing trade war. By year three, America’s GDP is projected to shrink by at least 0.7%, more than double the 0.3% hit to the global economy. Ironically, China—supposedly the main target—would see its GDP drop by just 0.1%, and even that could be offset by domestic stimulus measures.

The Flawed Logic Behind the “Global Membership Fee”

Lutnick’s earlier argument—that buyers (the U.S.) hold more power than sellers (exporting nations)—doesn’t hold up in a well-diversified global economy. Countries that manufacture goods can simply shift trade elsewhere, reducing their dependence on American consumers. The idea of a “membership fee” for foreign nations to sell in the U.S. is unrealistic.

Will This Plan Backfire?

While these policies may seem far-fetched, we are in 2025—so nothing is off the table. If they do happen, however, the consequences will likely hit the U.S. harder than anyone else. Let’s hope we never have to find out. What do you think? Will other countries really pay a membership fee? Are we wrong about Trump’s tax cuts—could they actually work? Let me know in the comments below!

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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