Deficit Trade

October’s Deficit Surges Despite Record Tariffs

JM Ashby
Written by JM Ashby

Although Trump's tariffs exploded during the month of October, the federal budget deficit also grew by nearly 34 percent compared to last year.

The federal deficit grew by 33.8 percent during the first month of the new fiscal year according to the Treasury Department, and that shortfall was partially offset by a nearly 40 percent increase in tariffs.

From the Associated Press:

The Treasury Department said Wednesday that the deficit last month totaled $134.5 billion, up from a shortfall in October 2018 of $100.5 billion.

The government ran up a deficit of $984.4 billion for the 2019 budget year that ended Sept. 30, 26% larger than in 2018. [...]

Revenues in October fell 2.8% to $245.2 billion from the same month a year ago. One revenue category that showed a big increase was tariffs on imports, which totaled $8 billion, up 39% from a year ago.

A report that tariffs totaled $8 billion in a single month should be read as Americans paying $8 billion in additional stealth taxes in a single month.

I believe it's an under-reported and underappreciated fact that revenue from Trump's tax on American consumers is making the federal deficit look slightly better than it actually is.

The deficit weighed in at just shy of $1 trillion during fiscal 2019, but that was offset by nearly $100 billion in revenue from customs duties; meaning the deficit would have been closer to $1.1 trillion if Trump's wasn't unilaterally taxing American consumers by imposing tariffs on imports.

Considering the Congressional Budget Office's (CBO) projection that the federal deficit for fiscal 2020 will be more than a trillion dollars -- and considering that the deficit for fiscal 2019 would have been nearly $1.1 trillion without tariffs -- we can infer that the deficit for the next year will be closer to $1.2 trillion if not higher.

The wild card that could either reduce or increase the deficit on a whim is Donald Trump.

Trump could escalate his trade war (or start new wars) by imposing more or higher tariffs or he could roll back his tariffs. Tariffs already on the books are so large that any event, whether he increases or decreases them, will have a noticeable impact on the nation's finances.

It occurs to me that if the next president ends Trump's trade war, they'll almost immediately face accusations that they've increased the deficit by $100 billion even if that figure was more or less hidden under Trump. But that wouldn't necessarily be a new phenomenon; President Obama faced similar accusations because he ended the practice of keeping the Iraq War off the books.

  • muselet

    “Our economy is the best it has ever been.” –Donald Trump

    Uh-huh. Sure.

    –alopecia

    • For him. And his cronies. Grrrrr. (yes, I did catch the sarcasm LOL)