President Donald Trump has made tariffs a cornerstone of his plan to rebuild America’s economic core. Research by Dr. Stephen Miran, Chair of the Council of Economic Advisers, lays out how tariffs can be used to bring manufacturing jobs back, a key promise of the Trump administration.
There is every indication that Mr. Trump will stay the course, notwithstanding near-term economic costs.
A weak point in the analysis is that it takes inordinately long for manufacturing capacity to build up even when there is an obvious economic opportunity brought about by strategic use of tariffs.
Mismatch between demand and supply can drive up prices. Inflationary pressure creates political realities that may undermine their efficacy as an economic cudgel.
Rapid build-up of production capacity faces two primary roadblocks.
The Trump administration is on course to address the first — regulatory minefields and bureaucratic apathy.
Second roadblock — availability of financial resources — calls for a reincarnation of a program the U.S. has previously used successfully in times of an existential threat.
Nearly 60% of the spending for U.S. war efforts during World War II came from debt, much of it from ordinary citizens through Series E bonds, also known as "War Bonds."
A version is still in circulation, as Series EE bonds, commonly referred to as "Patriot Bonds." These instruments are targeted at individual investors and can offer a low-risk investment opportunity.
It's time to bring them back to help make America make again.
I'm proposing Series-X Bonds, or "Make America Make Again" bonds to bring the message of a manufacturing rebirth to every doorstep.
These bonds will earn a monthly coupon so investors can see a cash return on a regular basis. We can make these bonds redeemable for cash on a predetermined schedule over a reasonably long maturity period, thus giving an investor an opportunity to realize capital appreciation should they need to cash out.
Projects financed by these funds will feature prominently as key drivers to America’s comeback story, complementing their economic appeal.
These bonds will not be tradeable, ensuring a long-term horizon for any investor and helping protect the program from vagaries of the market.
Money raised can be invested in rebuilding national capacities in priority areas, including energy, steel, aluminum, lumber, chips, rare-earth minerals, and technical education.
Recipient entities, all private enterprises, will have to adhere to a set of highest standards that reflect common sense, e.g., prioritizing use of American-made materials and equipment, requiring use of American-born workers and legal immigrants exclusively, guaranteeing equal opportunity for all, and so on.
Recipient entities must not forget that this is a financial investment — not a giveaway.
Borrowers will pay a coupon linked to a suitable index, plus a premium.
These bonds may also carry a conversion provision, thereby giving investors an stake in the upside. Borrowers must have transparency in how they operate, including how they use the money. In the case of limited availability of funds, a fair disbursement protocol can be created for competing projects.
Administering the entire effort will be a small body that acts as a pass-through.
Unlike mortgage behemoths like Freddie Mac or Fannie Mae, this entity will not package nor sell these loans.
They can charge a small fee to cover their costs but will be required to pass on any excess as a payout to investors.
During World War II, Gene Autry, an all-American actor, cowboy, and singer, helped sell Series E bonds by singing Irving Berlin's "You see those bombers in the sky? Rockefeller helped to build 'em so did I."
War Bonds helped bring the American can-do to Pointe du Hoc, Iwo Jima, Berlin, and Tokyo. Post-War economic boom ensured that the debt-to-GDP ratio halved in 10 years and the balance sheet of the Federal Reserve as a proportion of the U.S. GDP went down by 75% in four decades.
War Bonds not only helped establish America as the leader of the free world they were a good economic program any way we look at it.
That parallel is expected to hold for "Make America Make Again" (MAGA) bonds.
Properly designed, and executed, these bonds will bring the gospel of American manufacturing might to distant shores while making all corners of this great land of ours participate in a miracle.
A new gilded age for America must have its foundation on the shop floor.
"Series-X" bonds will get all of America to participate in its creation in a win-win fashion.
Partha Chakraborty, Ph.D., CFA is an economist, a statistician, and a financial analyst by training. Currently he is an entrepreneur in Water technologies, Blockchain and Wealth Management in the US and in India. Dr. Chakraborty lives in Southern California.
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