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The Fiscal Fantasies Of A “For-Profit” Government

BY INTELLICUREAN, JULY 21, 2025:

In the summer of 2025, former President Donald Trump and Commerce Secretary Howard Lutnick unveiled a bold proposal: the creation of an External Revenue Service (ERS), a federal agency designed to collect tariffs, fees, and other payments from foreign entities. Framed as a patriotic pivot toward self-sufficiency, the ERS would transform the U.S. government from a tax-funded service provider into a revenue-generating enterprise, capable of offsetting domestic tax burdens through external extraction. The idea, while politically magnetic, raises profound questions: Can the U.S. federal government become a “for-profit” entity? And if so, can the ERS be a legitimate mechanism for such a transformation?

This essay argues that while the concept of external revenue generation is not unprecedented, the rebranding of the U.S. government as a profit-seeking enterprise risks undermining its foundational principles. The ERS proposal conflates revenue with legitimacy, and profit with power, leading to a fundamental misunderstanding of the government’s role in society. We explore the constitutional, economic, and geopolitical dimensions of the ERS proposal, drawing on recent analyses from the Peterson Institute for International Economics, The Diplomat, and The New Yorker, to assess its fiscal viability, strategic risks, and national security implications.

Constitutional Foundations: Can a Republic Seek Profit?

The U.S. Constitution grants Congress the power to “lay and collect Taxes, Duties, Imposts and Excises” and to “regulate Commerce with foreign Nations” (Article I, Section 8). These provisions clearly authorize the federal government to generate revenue through tariffs and fees. Historically, tariffs served as a primary source of federal income, funding everything from infrastructure to military expansion during the 19th century.

However, the Constitution does not envision the government as a profit-maximizing entity. Its purpose, as articulated in the Preamble, is to “establish Justice, ensure domestic Tranquility, provide for the common defence, [and] promote the general Welfare.” These are public goods, not commercial outputs. The government’s legitimacy is grounded in its service to the people—not in its ability to generate surplus revenue.

The Federal Reserve offers a useful analogy here. While not a for-profit institution, the Fed earns more than it spends through its monetary operations—primarily interest on government securities—and remits excess income to the Treasury. Between 2011 and 2021, these remittances totaled over $920 billion. But this is not “profit” in the corporate sense. The Fed’s primary mandate is macroeconomic stability, not shareholder returns. Even during economic stress (as seen in 2022–2025), the Fed may run negative remittances, underscoring its non-commercial orientation.

In contrast, the ERS is framed as a profit center—an entity designed to extract wealth from foreign actors to reduce domestic tax burdens. This shift raises critical questions: Who are the “customers” of the ERS? What are the “products” it offers? And what happens when profit motives collide with diplomatic or humanitarian priorities?

Economic Modeling: Revenue vs. Net Gain

A rigorous analysis of Trump’s proposed tariffs comes from Chad P. Bown and Melina Kolb at the Peterson Institute for International Economics. In their April 2025 briefing, they use a global economic model to estimate the gross and net revenue generated by tariffs of 10%, 15%, and 20% on all imported goods.

Their findings are sobering:

  • A 15% universal tariff could generate $3.9 trillion in gross revenue over a decade (2025–2034), assuming no foreign retaliation.
  • However, after accounting for slower growth, reduced investment, and lower tax receipts from households and businesses, the net gain drops to $3.2 trillion.
  • If foreign countries retaliate with reciprocal tariffs, the net gain falls further to $1.5 trillion.
  • A 20% tariff results in the lowest net gain ($791 billion), due to intensified economic drag and retaliation.

These findings underscore a crucial distinction: tariffs are not free money. They impose costs on consumers, disrupt supply chains, and invite countermeasures. The ERS may collect billions, but its net contribution to fiscal health is far more modest—and potentially negative if retaliation escalates.

Additionally, tariff revenue is volatile and politically contingent. Tariffs can be reversed by executive order, invalidated by courts, or rendered moot by trade realignment. In short, the ERS lacks the predictability and stability necessary for a legitimate fiscal foundation. Tariffs are a risky and politically charged mechanism for revenue generation—making them an unreliable cornerstone for the country’s fiscal health.

Strategic Blowback: Reverse Friendshoring and Supply Chain Drift

Beyond economics, the ERS proposal carries significant geopolitical risks. In The Diplomat, Thiago de Aragao warns of a phenomenon he calls reverse friendshoring—where companies, instead of relocating supply chains away from China, move closer to it in response to U.S. tariffs.

The logic is simple: If exporting to the U.S. becomes prohibitively expensive, firms may pivot to serving Asian markets, leveraging China’s mature infrastructure and consumer base. This could undermine the strategic goal of decoupling from Chinese influence, potentially strengthening Beijing’s economic hand.

Examples abound:

  • A firm that invested in Mexico to reduce exposure to China redirected its exports to Latin America after Mexico was hit with new tariffs.
  • Another company shifted operations to Canada to avoid compounded U.S. duties—only to face new levies there as well.

This unpredictability erodes trust in U.S. trade policy and incentivizes supply chain diversification away from the U.S. As Aragao notes, “Protectionism may offer a temporary illusion of control, but in the long run, it risks pushing businesses away.”

The ERS, by monetizing tariffs, could accelerate this trend. If foreign firms perceive the U.S. as a hostile or unstable market, they will seek alternatives. And if allies are treated as adversaries, the strategic architecture of friendshoring collapses, leaving the U.S. economically isolated and diplomatically weakened.

National Security Costs: Alienating Allies

Perhaps the most damning critique of the ERS comes from Cullen Hendrix at the Peterson Institute, who argues that imposing tariffs on U.S. allies undermines national security. The U.S. alliance network spans over 60 countries, accounting for 38% of global GDP. These partnerships enhance deterrence, enable forward basing, and create markets for U.S. defense exports.

Tariffs—especially those framed as revenue tools—erode alliance cohesion. They signal that economic extraction trumps strategic cooperation. Hendrix warns that “treating alliance partners like trade adversaries will further increase intra-alliance frictions, weaken collective deterrence, and invite potential adversaries—none better positioned than China—to exploit these divisions.”

Moreover, the ERS’s indiscriminate approach—levying duties on both allies and rivals—blurs the line between economic policy and coercive diplomacy. It transforms trade into a zero-sum game, where even friends are fair targets. This undermines the credibility of U.S. commitments and may prompt allies to seek alternative trade and security arrangements.

Lutnick’s Barber Economics: Rhetoric vs. Reality

The ERS proposal is not merely a policy—it’s a performance. Nowhere is this clearer than in Howard Lutnick’s keynote at the Hill and Valley Forum, as reported in The New Yorker on July 21, 2025. Addressing a room of venture capitalists, defense contractors, and policymakers, Lutnick attempted to explain trade deficits using personal analogies: “I have a trade deficit with my barber,” he said. “I have a trade deficit with my grocery store. Right? I just buy stuff from them. That’s ridiculous.”

The crowd, described as “sophisticated tech and finance attendees,” was visibly uncomfortable. Lutnick’s analogies, while populist in tone, misread the room and revealed a deeper disconnect between economic complexity and simplistic transactionalism. As one attendee noted, “It’s obvious why Lutnick’s affect appeals to Trump. But it’s Bessent’s presence in the Administration that reassures us there is someone smart looking out for us.”

This contrast between Lutnick and Treasury Secretary Scott Bessent is telling. Bessent, who reportedly flew to Mar-a-Lago to urge Trump to pause the tariffs, represents the limits of ideological fervor when confronted with institutional complexity. Lutnick, by contrast, champions the ERS as a populist vessel—a way to turn deficits into dues, relationships into revenue, and governance into a business plan.

The ERS, then, is not just a fiscal experiment—it’s a philosophical battleground. Lutnick’s vision of government as a money-making enterprise may resonate with populist frustration, but it risks trivializing the structural and diplomatic intricacies of global trade. His “barber economics” may play well on cable news, but it falters under scrutiny from economists, allies, and institutional stewards.

Conclusion: Profit Is Not Purpose

The idea of a “for-profit” U.S. government, embodied in the External Revenue Service, is seductive in its simplicity. It promises fiscal relief without domestic taxation, strategic leverage through economic pressure, and a reassertion of American dominance in global trade. But beneath the surface lies a tangle of contradictions.

Constitutionally, the federal government is designed to serve—not to sell. Its legitimacy flows from the consent of the governed, not the extraction of foreign wealth. Economically, tariffs may generate gross revenue, but their net contribution is constrained by retaliation, inflation, and supply chain disruption. Strategically, the ERS risks alienating allies, incentivizing reverse friendshoring, and weakening collective security.

With Howard Lutnick as the plan’s leading voice—offering anecdotes like the barber and grocery store as proxies for international trade—the ERS becomes more than a revenue mechanism; it becomes a prism for reflecting the Administration’s governing style: transactional, simplified, and rhetorically appealing, yet divorced from systemic nuance. His “barber economics” may evoke applause from certain circles, but in the forums that shape long-term policy, it has landed with discomfort and disbelief.

The comparison between Lutnick and Treasury Secretary Scott Bessent, as reported in The New Yorker, captures this divide. Bessent, attempting to temper Trump’s protectionist instincts, represents the limits of ideological fervor when confronted with institutional complexity. Lutnick, by contrast, champions the ERS as a populist vessel—a way to turn deficits into dues, relationships into revenue, and governance into a business plan.

Yet governance is not a business, and the nation’s global responsibilities cannot be monetized like a corporate balance sheet. If America begins to treat its allies as clients, its rivals as profit centers, and its global footprint as a monetizable asset, it risks transforming foreign policy into a ledger—and leadership into a transaction.

The External Revenue Service, in its current form, fails to reconcile profit with purpose. It monetizes strength but neglects stewardship. It harvests dollars but undermines trust. And in doing so, it invites a broader reckoning—not just about trade and taxation, but about what kind of republic America wishes to be. For now, the ERS remains an emblem of ambition unmoored from architecture, where the dream of profit collides with the duty to govern.

THIS ESSAY WAS WRITTEN AND EDITED BY INTELLICUREAN USING AI

Analysis, Essays, Immigration, Law, Politics

Birthright, Borders, And The U.S. Constitution

In the July 11, 2025 episode of Bloomberg Law’s Weekend Law podcast, the spotlight turned to the Supreme Court and one of the most urgent constitutional questions of the present era: can the federal government deny citizenship to children born in the United States based solely on their parents’ immigration status?

At the center of the discussion was a new executive order issued by the Trump administration. The order aims to withhold automatic citizenship from children born to undocumented immigrants. In response, a federal judge in New Hampshire has not only issued a temporary nationwide block on the order but also certified a class-action lawsuit that could have sweeping implications.

This development, as legal analyst and former DOJ official Leon Fresco explained, is not merely procedural—it is strategic. The case, still in its early stages, may force the Supreme Court to revisit the meaning of the Fourteenth Amendment’s Citizenship Clause.

Legal Strategy: Class Action as Constitutional Tool

Fresco’s key insight concerned how litigants are adapting to recent changes in judicial thinking. After the Supreme Court expressed skepticism toward broad nationwide injunctions, many believed such tools were effectively dead. But Fresco pointed out that class-action certification remains a viable, and perhaps more precise, alternative.

The New Hampshire judge’s ruling created a nationwide class of plaintiffs: all children born on or after February 20, 2025, to parents who are either unlawfully present or not U.S. citizens or lawful permanent residents. The judge carefully excluded parents from the class, narrowing the focus to the children’s citizenship claims. This move strengthens the class’s legal position, emphasizing a uniform constitutional harm.

Fresco characterized this approach as both narrow in structure and expansive in effect. By building the case around a specific constitutional injury—the denial of citizenship by birth—the lawsuit avoids the kinds of inconsistencies that often weaken broader claims.

The Constitutional Question: What Does “Jurisdiction” Mean?

At the heart of the dispute lies the interpretation of the Citizenship Clause of the Fourteenth Amendment: “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States.”

For over a century, the courts have understood this to include virtually everyone born on U.S. soil, with only narrow exceptions. The Trump administration’s order proposes a reinterpretation—arguing that undocumented immigrants and their children are not “subject to the jurisdiction” of the United States in the full constitutional sense.

This argument is novel, but not entirely new. Versions of it have circulated in fringe legal circles for years. What is new is the attempt to enforce this interpretation through executive power. If allowed to stand, it would mark a major departure from long-established constitutional norms.

Tactical Delay: The Risk of a Judicial “Stay”

Fresco raised a more immediate concern: that the Supreme Court may avoid ruling on the merits of the case altogether—at least for now. The Court, he warned, might grant a temporary stay that would allow the executive order to take effect while the lawsuit works its way through the lower courts.

This would mirror a pattern seen in other immigration cases, such as those involving Temporary Protected Status and humanitarian parole, where short procedural rulings allowed sweeping policy shifts without a full constitutional review.

The danger of such a stay is not theoretical. If the executive order goes into effect, children born under it would enter legal limbo. Denied citizenship, they would lack basic documents and protections. Challenging their status later could take years—possibly decades. In this way, even a temporary policy can create permanent consequences.

The Role of the Court: Principle or Procedure?

A central theme of the podcast segment was the evolving role of the judiciary in overseeing executive actions. Fresco questioned how the Court could reject a class-action lawsuit like this one without also undermining the logic that allows nationwide relief in other types of cases—such as defective products that cause uniform harm across the country.

If the courts are willing to permit class certification for consumer safety, why would they deny it in a case concerning citizenship—a matter of constitutional identity?

Fresco’s analogy was sharp: the law allows national class actions over faulty cribs or pharmaceuticals; why not over a birthright denied?

His point revealed the tension between procedural restraint and constitutional responsibility. If the Court is serious about limiting nationwide injunctions, it must offer a consistent, principled rationale for where it draws the line.

The Political Climate: Avoidance Through Silence

Toward the end of the discussion, Fresco referenced former Attorney General Alberto Gonzalez, who has speculated that the Supreme Court may simply lack the votes to strike down the executive order directly. That possibility may explain the Court’s hesitancy to take up the issue.

Justice Neil Gorsuch’s past remarks—asking how the Court might “get to the merits fast”—suggest at least some justices recognize the urgency. But urgency does not always lead to clarity. If the Court allows the order to take effect temporarily, and then delays review, it could set in motion changes that are difficult to reverse.

In effect, the Court would be allowing the executive branch to reshape constitutional practice through interim decisions. That prospect, Fresco warned, is not only legally unstable but socially volatile.

The Stakes: Citizenship as Constitutional Reality

Ultimately, what this case asks is not only a legal question but a civic one: Is citizenship a stable constitutional right, or can it be redefined by policy?

The class-action strategy now moving through the courts offers one possible defense: a method of forcing judicial engagement by focusing on clear constitutional harm and avoiding broad, unwieldy claims. It is, in Fresco’s words, an effort to meet the Court on its own procedural terms.

Yet the deeper conflict remains. The very idea of birthright citizenship—once considered legally untouchable—is now on trial. Whether the courts decide quickly or delay, the consequences will be lasting.

Conclusion: The Constitution on the Line

The Bloomberg Law discussion offered more than a legal update. It revealed how quickly constitutional assumptions can be unsettled—and how creative legal strategies are now being used to hold the line.

The New Hampshire ruling, and the class it created, represent a new phase in this fight. Narrow in scope but vast in significance, the lawsuit calls on the judiciary to answer directly: Is a child born on U.S. soil a citizen, or not?

In that answer lies the future of constitutional meaning—and the measure of whether the law remains anchored to principle, or drifts with the political tide.

THIS ESSAY AND REVIEW WAS WRITTEN BY AI AND EDITED BY INTELLICUREAN