Billionaire hedge fund founder John Paulson, a big fundraiser for former President Trump, claimed Wednesday that Trump’s economic strategy would help in reducing United States inflation.
During an appearance on FOX Business Network’s “Mornings with Maria,” Paulson slammed Democrats’ Inflation Reduction Act for exacerbating the economy’s inflationary pressures.
“I think the Act should be, you should drop ‘Reduction’ — it should’ve been called the Inflation Act. Inflation under [President] Biden has been over 20% cumulatively since he’s been elected — under Trump it was just over 7%.
“So Trump managed the economy much better, much lower inflation, growth in real wages, and I’d expect the same if he’s elected again,” Paulson said.
Inflation was 1.4% when the Biden-Harris government took office in January 2021, but it continued to grow steadily due to pandemic-related supply chain disruptions and increased federal spending intended to alleviate the pandemic’s economic impact.
Inflation soared to a 40-year high of 9.1% in June 2022, causing the Federal Reserve to hike interest rates to their highest level in over two decades to combat inflation, which has since dropped to 2.4% in September, when the Fed began lowering interest rates.
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Paulson went on to explain that former President Trump “wants to bring down inflation, and he wants to bring down interest rates.”
“To do that, you have to constrain and bring down the deficit, and he’s got policies to do that.
“One is by constraining spending, for instance, the tax incentives for the Green New Deal subsidizing uneconomic forms of energy such as solar, wind, electric vehicles, cost about $1.2 trillion over the next 10 years.
“So eliminating those subsidies is a pretty significant reduction in spending,” Paulson said.
“By putting tariffs, if you put an average 15% tariff on the $3 trillion of imports, that’s $450 billion of incremental revenues. Growth will add incremental revenue. So by reducing spending and increasing revenues, the deficit will come down.”
Tariffs, or import duties, are the key source of new tax revenue in Trump’s economic agenda. Trump has stated on several occasions that the baseline tariff would be 10%, but he has also suggested that it would be 20%.
The Hedge Fund Billionaire has also hinted that tariffs are a negotiation tactic to secure more favorable trade terms for US exports, although it is unclear what level of tariffs would be enforced and whether they would be permanent.
The independent Committee for a Responsible Federal Budget (CRFB) calculated that a 20% universal baseline tariff would generate $4.3 trillion in revenue over a decade, while a 10% rate would earn approximately $2.5 trillion.
The CRFB’s research also takes into account potential revenue losses from dynamic impacts on the economy, as the Tax Foundation calculated that a 10% universal tariff and a 60% tariff on Chinese imports would reduce US GDP by approximately 1.2%.
The potential revenue loss from tariffs’ influence on the economy led CRFB to estimate that the more aggressive tariff measures would reduce the deficit by $2 trillion.
CRFB also said, “Such a significant change to trade policy could have economic and geopolitical repercussions that go beyond what a standard tax model would estimate and that, due to the novelty of this policy, the true economic impact is hard to predict.”
CRFB also estimated that increasing domestic energy output and repealing green energy tax incentives under the Inflation Reduction Act would save approximately $700 billion, based on their primary estimate, albeit this figure might vary between $750 billion and $550 billion.
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