Exploring Trump's Claim of Using Tariffs to Pay Down $21 Trillion in Debt

Mike Mish Shedlock

Trump claims he will use tariffs to pay down the national debt. Let's explore the idea with pictures.

Trump's Claim

Data for the above chart downloaded from US Government Debt, not an official government website. There are lots of excellent charts one can view already made or create from downloaded data.

Budgeted vs. Actual Deficits

I created the above chart showing budgeted deficits vs what actually happened. I calculated actual deficits by subtracting the year-over-year national debt from the year-over-year national debt from the prior year.

Projections vs Reality

In nearly all cases, the actual deficit is way higher than projected. Why?

Because the projected deficit does not include all of the amount owed to the Social Security Trust Fund. That amount is called off-budget. But when the calendar year rolls over, the difference magically appears as a bigger than projected increase in the national debt.

Trump Projected Deficits

Deficits under Trump are expected to range from $666 billion to $987 billion, increasing every year. The total projected sum is about $3.47 trillion.

Tariff Study

CNBC reports US Reaps More than $1.4 Billion from Steel and Aluminum Tariffs.

The obvious problem with the study is that it does not include any losses.

Let's ignore the losses and assume there are only gains. In fact, let's assume the gains will be 100 times greater annually, without any losses.

Question of the Day?

Even if the deficit actually comes in at the projected rate (trust me, it will underperform expectations), what is the likelihood tariffs will reduce the national debt?

The answer of course is ZERO.

Trump's budget will add a minimum of $500 billion every year to the national debt.

Mike "Mish" Shedlock

Comments (18)
No. 1-11
Zardoz
Zardoz

Tarrifs AND the raise he's asking the troops to forgo. What a warrior!

2banana
2banana

Considering obama added $10 trillion to the deficit - this looks like a step in the right direction. And we are not even discussing the Great QE Unwind.

channelstuffing
channelstuffing

deficit running quarter trillion per quarter in a "booming" economy!Subtract the phony,manipulated bait n switch accounting scams DC uses to pretend the deficit is "only" a trillion per year,real deficit is more than double that,So no,sorry nothing is gettin paid down (ever)!Inflated away/defaulted on sure,but paid down....lol!

Webej
Webej

Kudos to Mish for looking at the year-to-year difference in debt instead of the fiscal deficit. The tariffs are of course not in the place of taxes, but are a very uneven, underhanded, and opaque form of taxation (of American consumers & companies). Pity you did not also explore the relationsip between fiscal and trade deficits from a national accounts point of view: For a businessman and business graduate, Trump is showing yet again how little he grasps of the actual mechanics of the real world.

Stuki
Stuki

We just add a bunch of taxes to lower the taxes on "our" people! And abandon free market principles to save the free market! And go to war for peace! Heck, why not? The idiots lap it up uncritically every time....

oudaveguy98
oudaveguy98

I really enjoy the data analysis on here; it is woefully lacking in the msm. Questions I think of with tariffs: "What does the economy and deficit look like if we are even slightly nudged back towards a manufacturing vs service sector McJobs one?" "If Trump goes into 2020 somehow without a recession, does this stop being portrayed as the Obama Economy by the msm?" "What is a good trade off ratio of high paying manufacturing job gains vs Mcjobs losses if the administration's prognostications on tariffs/mercantilism somehow prove accurate?"

Realist
Realist

Trump is going to pay down the 21 Trillion national debt with tariff money! Hilarious! Who could possibly be stupid enough to believe that! Oh, right; Trump supporters. Where does this tariff money come from anyway? From American businesses and consumers of course! So its just another tax. If Trump manages to last 8 years as President, I expect him to add more to the debt than Obama, who added more than Bush, who added more than Clinton etc.

Zardoz
Zardoz

Ultimately, the consumer must pay the tariff. Guess whose taxes just got raised ?

Zardoz
Zardoz

Thats a lot of ifs...

ML1
ML1

Without the continued increase in US government debt, US state debts and US company debts and US consumer debts the offshoring of well paying jobs to China, India and Mexico and the importation of millions of illegal immigrants and millions of legal immigrants to USA to lower wages would have led to a complete collapse in demand and consumption in USA crashing markets and crashing profits.

This means the only way offshoring of well paying jobs and importing millions of illegal immigrants and millions of legal low wage immigrants to USA could have happened is through continued increases of debt.

If there was no continued increase of debts companies offshoring jobs or giving illegal immigrants jobs or importing low wage legal immigrants would have had to eat the consequences of their actions by crashing demand in USA for their products and services so they would NOT have offshored production and they would NOT have hired illegals or imported low wage immigrants.

The problem with the huge debts is that since increases in debts have been used to hide the hollowing out and destruction of US economy these debts can NEVER be repaid and there is a huge FALSE demand for things and services caused by increases in debts that are not sustainable.

When the crash comes it will be worse than 1930's...

Debts will NOT be repaid because they can NOT be repaid.

Stock prices are a mirage based on a false demand for products and services.

Advertising based businesses like Facebook and Google have stock prices that are based on inflated prices and inflated demand for advertising caused by consumption enabled by continued increase in debts.

ML1
ML1

Trump is spending like a drunken sailor and increasing the US government debt at a much higher rate than Obama did...


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