The Trump Economy: An Opinion

How healthy is the Trump economy? According to President Trump, the economy is healthy, the best in recent years. But given the media reports over the past several months, I find his claim hard to believe.

I am not an economist. My most difficult courses in college were my two economic classes. However, I have recently spent days evaluating what is considered a neutral analysis on the American economy. Economic evaluations by Purdue University, the Federal Reserve, Deloitte, and Ernst and Young Parthenon report that in 2025, the U.S. economy experienced slower growth, increased inflation, and potential challenges in consumer spending as compared to 2024. In 2025, the expected economic growth rate of around 1.5% is less than it was in 2024 (2.8%). This reduced growth rate is likely due to President Trump’s high tariffs and overall reduced consumer spending (although the recent pre-Christmas shopping has set records).

The Simple Data

The unemployment rate rose slightly in 2025, reaching 4.8%, as compared to 4% in 2024. The risks surrounding the labor market have sharply increased. The increase is linked to the cooling labor market and higher costs due to tariffs. At the same time, business investment has decreased due to economic uncertainty and higher costs. This is partially due to the increased tariffs.

According to the U.S. Bureau of Labor Statistics, consumer Inflation in 2024 was historically low at 2.9%. However, the 2025 annual rate is estimated to be 4.1%. While the Federal Reserve has been cautious in lowering its prime lending rate, a further cut in December could bring the target range for inflation to +3.5% – +3.75% by year-end.

These trends indicate that American businesses and citizens are having a difficult time navigating the changing federal economic policies. In addition, the uncertainty in U.S. economic policies has had an international impact. European markets are more competitive. EY Parthenon forecasts that the dollar will continue to depreciate against the Euro. The same is projected for the dollar against the yen.

How Does America Compare with Other Major World Economies?

CHINA

In 2024, China’s economic growth stood at 5.3%, but slowed to 4.8% by the end of the third quarter of 2025. The annual growth is projected to be 5%. The strengthening of private consumption is a key priority for the Chinese authorities. Despite US tariffs, manufacturing activity has been driven by export growth in other trade partnerships. However, export growth is expected to lose momentum in the coming months as the export sector suffers from the rise in protectionism and the weakening of global demand.

EUROZONE

The planned increase in military spending in Europe, and significant budgetary support in Germany, have provided a boost to the Eurozone in 2025. This trend will likely continue into 2026 if support for Ukraine remains strong. However, economic growth will be limited in the short term by trade tensions between the United States and China. Inflation is expected to remain stable around the 2% target.

FRANCE

France has a low GDP rate of 0.5%. The inflation rate continues to decline. The low GDP may be the result of significant political uncertainty and its impact on household confidence. But German economic growth recovery should push the French rate up to 1.2%.

UNITED KINGDOM

Economic activity in the United Kingdom strengthened slightly in 2025, rising to 1.3%. According to EY Parthenon, it will continue to slow to 1.0% in 2026. However, increased defense spending in the United Kingdom and Europe may support an increased GDP. Downside risks have been mitigated by the trade agreements with the United States. In 2025, inflation remained well above 2%, supported by wage growth and persistent supply-side pressures. The Bank of England cut its key interest rates again in November which may further reduce inflation.

JAPAN

Japanese growth has been increasing throughout most of 2025. However, due to the US trade policy, the negative consequences for export businesses have resulted in muting this growth. Household consumption is facing inflation. The Bank of Japan has started a cautious monetary tightening cycle, bringing the key rate to +0.5%. In December, the rate was raised again to deal with persistent inflationary pressures.

Final Observations

In summary, the United States economic policies under President Trump have eroded the gains achieved during previous years. For example, President Biden had inherited a troubled economy due to the COVID outbreak and the Trump administration’s “American Economic Revival” plans. (See Trump’s 2016 speech in Time, September 15, 2016.)

When President Joe Biden left the White House economics reported a strong economy, historic gains in the job market, a foundation for future manufacturing growth, and having brought down decades-highinflation without triggering a recession. Those feats, economists say, are even more impressive considering the nation was deep in the throes of a deadly, economy-scarring pandemic

Post Trump administration analysis of his American Economic Revival plan found that the plan did not work. Economist Justin Wolfers wrote in February 2019: “I’ve reviewed surveys of about 50 leading economists – liberals and conservatives – run by the University of Chicago. What is startling is that the economists are nearly unanimous in concluding that Mr. Trump’s policies are destructive.”

In my opinion, the second term Trump policies are no better than those of his first term. President Trump has placed the country in an economic position that is less than favorable in the world economy, and more importantly, domestically. Inflation is still high. The unemployment rate is static. Trump tariffs have increased prices domestically and alienated many nations. In early 2025, the Yale Budget Lab estimated that consumer prices would rise by 1.4% to 5.1%, with an average cost per household of $1,900 to $7,600. In a Yahoo/YouGov poll conducted Nov. 21-24, 49% of respondents said Trump’s actions, since taking office for his second term in January, have raised prices instead of cutting them. Only 24% said he’s lowered costs.

Can America Have a Balanced Budget and Pay Down Its National Debt?

Introduction

When Kennedy took office, the national debt was $289 billion, and of this amount $270 billion was incurred during World War II. As of the latest update, the current national debt of the United States is approximately $37.17 trillion. Every president except for Bill Clinton, and Lyndon Johnson in his last year in office, spent less than budgeted. For all other years, the federal government spent more than it took in, increasing the national debt. More specifically, the breakdown during each presidency is as follows:

John F. Kennedy (1961–1963): The national debt increased by approximately $23 billion, an increase of 8%.
Lyndon B. Johnson (1963–1969): The national debt increased by approximately $42 billion. However, in 1969 the federal government ran a budget surplus of $3.2 billion, With the surplus and national debt increased just over 13% over the Johnson years.
Richard Nixon (1969–1974): The national debt increased by approximately $121 billion, a 39% increase.
Gerald Ford (1974–1977): The national debt increased by approximately $224 billion, an increase of 57%.
Jimmy Carter (1977–1981): The national debt increased by approximately $299 billion, an increase of 76%.
Ronald Reagan (1981–1989): The national debt increased by approximately $1.86 trillion, an increase of 187%.
George H. W. Bush (1989–1993): The national debt increased by approximately $1.55 trillion, an increase of 54%.
Bill Clinton (1993–2001): The national debt increased by approximately $1.4 trillion from 1993-1997. However, during the years 1998-2001 the federal government had budget surpluses for four consecutive years. Clinton’s overall increase in the national debt was 32%.
George W. Bush (2001–2009): The national debt increased by approximately $5.85 trillion, an increase of over 105%.
Barack Obama (2009–2017): The national debt increased by approximately $8.34 trillion, an increase of 70%.
Donald Trump (2017–2021): The national debt increased by approximately $8.18 trillion, an increase of almost 41%.
Joe Biden (2021–2025): The national debt increased by approximately $6.17 trillion, an increase of 25%.

What is the National Debt?

The National Debt is the amount of money that the United States Treasury has needed to borrow to pay bills beyond the amount budgeted for any given fiscal year. Who loans the U.S. this money? The national debt is held by a combination of domestic and foreign entities. The largest domestic holder of U.S. public debt is the Federal Reserve Bank, with holdings of $5.24 trillion. Domestic Investors includes mutual funds ($3.7 trillion), depository institutions ($1.6 trillion), state and local governments ($1.7 trillion), pension funds ($1.0 trillion), insurance companies ($0.5 trillion), and U.S. savings bonds ($5.7 trillion). There are also foreign Investors like Japan. Japan is the largest foreign holder of U.S. public debt ($1.1 trillion), followed by China ($0.8 trillion), and the United Kingdom ($0.7 trillion). There is also debt held by various government agencies, such as the Social Security Trust Fund, which owns a significant portion of the debt. Overall, the U.S. national debt is a mix of public debt borrowed from domestic and foreign investors and intragovernmental debt reflecting internal government transactions ^{1 and 2}.

How Significant is the Interest Paid on the National Debt?

In addition to the government spending more than it takes in, interest payments on the national debt have been a substantial and growing part. For example, the U.S. government paid $749 billion in interest on the national debt through the first nine months of FY25, compared to $682 billion for the same period in FY24. This increase is due to the rapid accumulation of federal debt and higher interest rates. The Congressional Budget Office (CBO) projects interest payments will rise from $1.0 trillion in 2026 to $1.8 trillion in 2035. This makes interest payments the fastest-growing portion of the federal budget. Relative to the size of the economy, interest payments on the national debt are expected to reach 3.2% of GDP in 2026 and 4.1% of GDP by 2035 ³. However, the actual interest payments on the national debt are projected to rise to 18.4% of federal revenues by the end of 2025 and 22.2% by 2035 ⁴.

However, the major contributing factor to the increase in national debt is failure to balance the budget. As noted earlier, there were only two presidents who managed to have budget surpluses.

If the Annual Budget is Balanced, Can Our Government Pay Off Its National Debt?

The answer is yes! It will take a determined bipartisan Congress to create a balanced budget. Budget spending and the projected income need to be balanced. A portion of each year’s annual budget must be directed toward a multi-year plan to pay off the national debt. This is much like the mortgage schedule that homeowners receive when they borrow money to buy a home. Cuts in many programs will be necessary. That is the hard part of finding a bipartisan middle ground!

The income level can and should be increased. As noted in the Introduction, at one time the federal government taxed Americans who made over $400,000 per year at a rate of 91%. Today, those making over $400,000 are taxed at only 37%, and if President Trump gets his planned tax changes that rate may drop to 22%. This potential plan does not reduce the federal deficit. Although Trump claims that his tariff plan will generate income and make up for the decrease in tax income, the CBO estimates that the Trump budget will instead be a long-term drain on resources.

During the Eisenhower era (1953–1961), the top income tax rate was an astonishing 91%, applied to income over $400,000 (equivalent to about $4 million today). This was not a flat tax. Only income above the $400,000 threshold was taxed at that rate. However, due to deductions and loopholes, very few actually paid the full 91%. Still, even with deductions, the wealthy paid a significantly higher tax rate than today. Most of the wealthy class often paid taxes reaching 40–60%. In addition, during President Eisenhower’s administration, the corporate tax rate in the United States was relatively high. The top corporate tax rate was 52%, which was one of the highest rates in U.S. history. This high tax rate was aimed at generating revenue for post-war economic growth and infrastructure development. Today’s corporate tax rate is only 21%. Yet, despite the high tax rate on the wealthy and corporations, the U.S. economy grew at an average of 4% annually. Unemployment remained low, and income inequality was far less severe than today. In addition, the high individual and corporate tax rates encouraged reinvestment in business expansion rather than excessive executive compensation.

Eisenhower’s tax rate was eventually lowered by his successors as follows:

John F. Kennedy (1961–1963): The top rate remained at 91%.

Lyndon B. Johnson (1963–1969): The top rate was reduced from 91% to 70%.
Richard Nixon (1969–1974): The top rate remained at 70%.
Gerald Ford (1974–1977): The top rate remained at 70%.
Jimmy Carter (1977–1981): The top rate remained at 70%.
Ronald Reagan (1981–1989): The top rate was reduced from 70% to 50% in 1982 and further reduced to 28% in 1988.
George H. W. Bush (1989–1993): The top rate was increased to 31% in 1991.
Bill Clinton (1993–2001): The top rate was increased to 39.6% in 1993.
George W. Bush (2001–2009): The top rate was reduced to 35% in 2003.
Barack Obama (2009–2017): The top rate was increased to 39.6% in 2013.
Donald Trump (2017–2021): The top rate was reduced to 37% in 2018.
Joe Biden (2021–2023): The top rate remained at 37%.
Donald Trump (2023–present): The top rate may be reduced by 15% from 37%, resulting in a rate could be 22%.

While there’s no official CBO estimate for a full return to Eisenhower-era rates, economists and policy analysts have modeled scenarios. If the rate were set at 91% for incomes over $400,000, the estimated additional income would be between $300 and $400 billion. Adding in a capital gains tax at the Eisenhower rate would add another $100 – $150 billion. While such a high tax rate is not likely, raising the level back to Clinton’s almost 40% or Nixon’s 70% would still generate significant income. In comparison, even these high rates are less than the 2025 rates in other countries.

Top Marginal (tax on the highest earners) Income Tax Rates by Country (2025)

Sweden (57%)

Denmark (55.9%)

France (55.4%)

Germany (47.5%)

UK (45%)

Australia (45%)

Japan (45%)

Canada (33%)

Singapore (24%)

The U.S. has lower top income tax rates than most wealthy nations, especially in Europe. Corporate tax rates in the U.S. are mid-range, higher than tax havens like Ireland and Singapore but lower than many EU countries.

Rasing the top corporate tax rate to the Eisenhower administration level of 52%, is not likely. If we consider the total corporate profits in the U.S., which were approximately $2.3 trillion in 2021, raising the tax rate to 52% could theoretically generate substantial additional revenue 1.

Debt-to-GDP ratio

This is a line of thinking in economics. What matters most is the relationship between the national debt and the GDP, not just the raw size of the debt.

If GDP (the total value of goods and services produced) grows at least as fast as (or faster than) the national debt, then the debt becomes smaller relative to the size of the economy. In other words, even if the absolute dollar amount of debt grows, the country can more easily handle it if the economy that supports it is growing too. This is like a household whose mortgage stays the same, but their income keeps rising — the payment becomes a smaller burden over time.

Economists often use the debt-to-GDP ratio (Total National Debt divided GDP) as a key measure of sustainability. If GDP growth exceeds the interest rate on the debt, the ratio can fall even without cutting spending or raising taxes. Mainstream Keynesianeconomists — such as Paul Krugman and Olivier Blanchard — argue that if GDP growth outpaced interest rates, debt is manageable.

But there are big caveats to this line of thinking. If GDP growth slows or interest rates rise sharply, the math can flip — making debt harder to sustain. In addition, as mentioned earlier, political will to maintain stable deficits is also key, but difficult to achieve. Debt sustainability depends on investor confidence — if lenders lose faith, borrowing costs can spike regardless of GDP growth.

GDP growth is helpful, but insufficient alone to significantly reduce the debt burden. Sustainable debt reduction requires both economic growth and active fiscal management (like a balanced budget or surpluses, and/or keeping interest costs low). In short, while economic growth helps, fiscal discipline and favorable interest conditions play an even larger role in reducing the debt burden.

Conclusion

While economic prosperity, the Debt to GDP ratio, is worth noting, there are essentially two ways to reduce the national deficit– cut spending and raise more revenue. In addition, it would also help if the Federal Reserve cut the interest rate they charge banks to borrow. This in turn would affect the interest rate for the government allowing the government to refinance the old debt coming due at a lower rate. This is like a homeowner with a 7.4% mortgage refinancing at a new mortgage rate of 5%.

Americans need to elect representatives who will balance the budget. As individuals, most of us strive to live within our income and plan ahead for a significant expenditure. Our government should be held to the same standard. America can and should pay off its national debt.

Sources

Most of the data is from the Congressional Budget Office, National Bureau of Economic Research, Center for Economic Policy Research.

Other specific sources:

¹ Venditti, Bruno, “Charted: Here’s Who Owns U.S. Debt” – Visual Capitalist, December 10, 2024.

² Amadeo, Kimberly, “Who Owns the U.S. National Debt?” January 19, 2023.

³ What Are Interest Costs on the National Debt? – The Balance, Peterson Foundation, July14, 2025.

⁴ Hyatt, Diccon, “A Record $1.2 Trillion Interest Payments Are Blowing Up” – Investopedia, September 13, 2024.

Our National Debt—Is There a Way to Solve It That Makes Both Republicans and Democrats Happy?

Congress has now passed the One Big Beautiful Bill based on President Trump’s plan to reduce the budget. As the media has reported, the support for this legislation is split in both the Senate and House. Why?

Our national debt is presently $37 trillion. To pay interest in 2023, the budget had to set aside $726 billion, approximately 14% of the total federal budget. To cover the growing debt created by deficit spending, the Treasury Department issues securities (Treasury Bonds) that will be paid at a future date. For most of us, debt is something we can live with as long as we continue to bring in enough income to cover our annual expenses, loan payments and interest. To meet these demands, we can raise more money by working additional hours or cutting our spending. The government has the same dilemma. The federal budget can either cut spending or increase revenue. The source of additional revenue is taxes. Thus, the problem!

Cutting the budget may seem relatively easy. However, as is evident from the debates in both houses of Congress, cutting Medicaid or Medicare Advantage would have a significant impact on the working poor. Other discretionary cuts to defense and other programs are not deemed desirable by either one side of the political spectrum or the other.

President Trump is determined to make his tax cuts permanent, so increasing taxes under his watch is a nonstarter. Bernie Sanders advocates an increase in taxes on the wealthy (high income individuals and corporations, those making over $250,000 from 35%).

Can the debt be paid back? The answer is yes. However, the task is challenging. The biggest challenge is the lack of political will. Next is the mixed opinions of “we the people.” However, it may be possible to find solutions that will satisfy the majority of Americans. The Congressional Budget Office (CBO) suggests 76 options to balance the budget and pay down the national deficit. What are these options? These options span both the spending and revenue sides of the federal budget and are designed to merely inform lawmakers without making specific recommendations.

Category	Example Option	Estimated 10-Year Savings
Medicaid	Cap federal spending	$501B–$871B
Medicare	Raise Part B premiums	$448B
Social Security	Flat benefit structure	$593B
Defense	Cut DoD budget	$995B
New Tax	5% VAT (Value Added Tax)	$3T
Tax Reform	Eliminate itemized deductions	$2.5T

These options are not endorsements, but rather a menu of possibilities for lawmakers to consider. Savings from changes in entitlements would save less than $2 trillion. Saving from cuts in defense spending and changes in tax laws (selectively raising some income taxes) would save almost $6.5 trillion. The best path forward would appear to be changing our tax structure to reflect historical trends.

In the past 50 years, the United States has had a balanced federal budget—or more precisely, a budget surplus—only four times, and all of them occurred consecutively during the late 1990s and early 2000s: All four years were under President Clinton: in 1998 $69.3 billion; in 1999 $125.6 billion; in 2000 $236 billion; in 2001 $128.2 billion. President Clinton’s administration showed a rare period of fiscal discipline, driven by a strong economic boom in the technology industry, spending restraint, and higher taxes from capital gains and Income Taxes. During President Clinton’s administration, the Income Tax was increased from 31% to 39.6% for those earning over $250,000. Capital Gains Tax was reduced from 28% to 20% on assets held for over one year, and the Corporate Tax rate was increased to 35%.

Taxes were even higher during the Eisenhower presidency. The top marginal income tax rate for individuals was as high as 91% for income above $200,000. This means that any income earned above this threshold was taxed at 91%. The corporate tax rate was as high as 52%, depending on the level of profits. For example, profits above $25,000 were taxed at 52%. Despite facing two significant recessions, Eisenhower managed to forge a consensus on defense spending and maintain a strong economy (Penner, Rudolph, June 2024).

While tax rates were lowered during the Reagan administration with the passage of the 1981 Economic Recovery Tax Act and the Tax Reform Act of 1986, there is much debate over what became known as Reaganomics or “trickle down” economics. Data shows that tax cuts and other policies to fatten corporate profits don’t always result in job creation, investment, productivity, and economic growth. There is also no concrete evidence supporting the opinion that tax cuts pay for themselves (Amadeo, Kimberly, “5 Reasons Why Supply-Side Economics Does Not Work,” Investopdedia).

Since 2001, the U.S. has run a budget deficit every year, including during periods of economic expansion. Both Republicans and Democrats were contributors to the deficit spending. The primary reasons for the deficits include tax cuts in 2002 and 2003 under President Bush and in 2017 under President Trump. Currently, Income Tax for those making over $250,000 a year is 35%, down almost 5% from the Clinton rate. Those making less than $11,600 a year pay a 10% tax. Capital Gains Taxes have remained steady. Corporate Taxes were reduced from 35% to 21%. At the same time, defense and entitlement spending has increased. In the decade following Sept. 11, 2001, military spending increased by 50% when adjusted for inflation. Following these two major contributors was the COVID epidemic and government spending to bolster the economy.

America can have a balanced budget, and even a surplus, which could be used to pay down our federal deficit more quickly. With the passage of the current budget bill, which is NOT balanced, the federal deficit will increase. The cuts to entitlement programs are not enough to offset tax cuts and increased spending on the military and immigration enforcement programs. Our nation’s financial problems can be solved. Cuts to some programs are needed. However, the real answer rests in supporting tax rates that can allow for a balanced budget. The solutions will not make either party totally happy. Compromise must return to the bargaining table!. Program cuts, along with increased taxes, can reduce the federal deficit!