Billionaire hedge fund founder John Paulson, a major fundraiser for former President Trump, said Wednesday that Trump’s economic plan would help bring down inflation.
Paulson told FOX Business Network’s Maria Bartiromo during an appearance on “Mornings with Maria” and criticized Democrats’ Inflation Reduction Act as worsening inflationary pressures in the economy.
“I think the Act should be, you should drop ‘Reduction’ – it should’ve been called the Inflation Act,” Paulson said. “Inflation under 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.
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Inflation was 1.4% when the Biden-Harris administration took office in Jan. 2021, but began a steady rise amid pandemic-related supply chain disruptions and elevated federal spending meant to mitigate the pandemic’s economic impact.
Inflation surged to a 40-year high of 9.1% in June 2022, prompting the Federal Reserve to raise interest rates to the highest level in over two decades to tamp down inflation, which has since slowed to 2.4% in September when the Fed began cutting interest rates.
Paulson went on to explain that 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, increasing revenues, the deficit will come down,” he added.
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Tariffs, which are taxes on imports, are the primary source of new tax revenue in former President Trump’s economic plans. Trump has said the baseline tariff would be set at 10% on some occasions, though he has also suggested at other times that it would be 20%.
He has also suggested that tariffs are a negotiating tool to secure more favorable trade terms for U.S. exports, leaving it unclear what level of tariffs would be implemented and whether they would remain in place over the long-term.
The nonpartisan Committee for a Responsible Federal Budget (CRFB) estimated that the universal baseline tariff would bring in $4.3 trillion in revenue over a decade if it’s set at 20%, while it would yield about $2.5 trillion at a 10% rate.
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CRFB’s analysis also incorporates potential revenue loss from dynamic effects on the economy, as the Tax Foundation estimated the 10% universal tariff and 60% tariff on Chinese imports would lower U.S. gross domestic product by about 1.2%. Potential revenue loss from the tariffs’ impact on the economy resulted in CRFB estimating the deficit reduction impact of the more aggressive tariff proposals at $2 trillion.
CRFB noted that “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.”
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CRFB also estimated that increasing domestic energy production and reversing green energy tax credits under the Inflation Reduction Act would save about $700 billion based on their central estimate, though it could range higher to $750 billion or lower to $550 billion.
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