Throughout a July 20 interview, on CBS’ “Face the Nation,” Commerce Secretary Howard Lutnick made an unbelievable declare. He bragged that the US was gathering near $30 billion a month in tariffs. He then went on to say: “You got to remember — this is going to pay off our deficit.”
Nobody who pays consideration to federal fiscal coverage truly believed this assertion. And, if there was any doubt in regards to the doubtful declare, July’s Treasury report, launched on Tuesday, makes it clear simply how mistaken Lutnick is. In response to the July report, federal deficits are a great distance from being paid off by new taxes on imports. As a substitute, federal deficits are getting greater as Trump’s spending spree reveals no indicators of abating.
Particularly, July’s federal spending got here in as the very best ever, topping even the grotesque spending of July 2020 in the course of the darkish days of the covid panic.
In response to the Treasury, in July, the US authorities collected $338 billion. That’s up $8 billion from the earlier July, so perhaps Lutnick and Trump suppose that is very spectacular and one thing to brag about. The issue is the US authorities additionally spent $629 billion throughout the identical interval. That’s, Trump and Congress spent almost two {dollars} for each greenback in tax income, for a month-to-month deficit of $291 billion. That’s up 19 % over July of 2024 and is the most important July deficit in 4 years. July’s deficit even comes near July 2021’s deficit of $302 billion, which occurred throughout a interval of runaway covid spending.
In different phrases, the Trump-headed federal authorities is spending prefer it’s pandemic time once more. Not surprisingly, then, the US federal debt continues to surge upward, with complete debt passing the $37 trillion mark on Monday.
That’s what occurs when the US authorities piles on a further $291 billion in a single month, all whereas Lutnick is on a media tour claiming that tariffs will remove deficits.
We’re now ten months into the 2025 fiscal 12 months, and the ten-month complete is at a 4 12 months excessive, coming in at $1.6 trillion, a rise of seven.5 % over fiscal 12 months 2024. Almost half of that deficit comes from the six months since Trump was sworn in as president in late January.
Looking forward to the remainder of the present fiscal 12 months—which ends on September 30—the whole deficit is poised to surpass 2024’s FY deficit of $1.8 trillion. If August and September are something like July, the whole FY deficit will even exceed $2 trillion, making 2025 the worst 12 months for deficits since covid.
Importantly, the report additionally confirmed that as complete debt ranges surge, monumental quantities of tax {dollars} should go to paying curiosity on the debt. Of the $338 billion in income collected throughout July, $91 billion, or 27 %, went to only paying curiosity on the nationwide debt. Which means multiple in 4 {dollars} in income went to not any infrastructure or something that immediately’s taxpayers may truly profit from. No, greater than 1 / 4 of tax income goes to repay misplaced wars like Iraq and Afghanistan, or to different boondoggles.
Amazingly, although, lots of Trump’s supporters nonetheless insist that the Trump administration is crammed with fiscal hawks. But, the much-touted Trump funds cuts have amounting to a “nothingburger” on the subject of federal spending. DOGE—which has admittedly performed some good work in slicing harmful propaganda factories like USAID and numerous NGOs—has made no significant adjustments to general spending. The administration plans to ship ever bigger quantities of taxpayer {dollars} to the State of Israel and to the unelected dictators who run the Ukrainian authorities.
We will additionally count on these ongoing deficits to drive the president to use much more strain to the Federal Reserve to decrease brief term-interest charges. A part of the explanation that a lot of federal revenues should now go to debt service is the rising price of federal debt. As yields on Treasurys have risen, so has the month-to-month invoice on paying the federal debt. In his numerous rants towards Jerome Powell and the Federal Reserve, Trump has complained that new federal debt is just too costly, and the US authorities has been spending an excessive amount of on curiosity. Trump has explicitly said that the central financial institution should drive down rates of interest so debt is cheaper.
It’s straightforward to see why Trump could be preoccupied with this. His administration has gone all-in on spending at ranges not seen for the reason that covid period. Trump insists that the US authorities is kind of in a golden age of prosperity, but the federal authorities is spending just like the US is within the midst of a disaster. This spending will definitely not be reined in by Trump’s “big, beautiful bill” which additional inflates federal spending, and comprises just some token funds cuts.
Going ahead, these kinds of deficits imply extra financial inflation—and thus extra value inflation—and a continuation of the fiscal establishment. DOGE has failed in its said mission. Trump isn’t any fiscal hawk. The Republican management in Congress—with Trump’s encouragement—will maintain spending at record-breaking ranges. We will count on extra of this all through the remainder of this administration.
