What Had Been Improving Budget Deficit Numbers Slam Hard Into Reverse

Trump crowed about the numbers last month, taking the credit for himself, and all the extra cash the U.S. is bringing in from China tariffs, and all the business U.S. companies are bringing back as a result of those tariffs.

Now that picture has suddenly and dramatically reversed, according to Trump’s own Treasury Department’s latest report, hot off the presses. And unless some accounting quirk is behind a lot of it, the results look pretty stunning. In fact, it’s almost a mirror image of the month before, where payouts are far exceeding revenues instead of the opposite.

Trump of course is gonna blame the poor revenue result on the Federal Reserve for being too cautious and not providing easy money. We’re with the Fed on this. One of their main jobs is to be cautious, and to err on the side of caution for reasons we’ll explain in a sec. A major program of interest cuts is best tool that’s generally available the Fed when the economy is slowing, and needs a shot in the arm. It’s almost never used to turbo charge an already surging economy, which is what Trump wants. There’s a reason for that: if the fed cuts rates when the economy is going gangbusters, it has no-where to go if the economy slows. It can’t really cut rates to stimulate a sagging economy anymore, because it already cut rates so far when things were good. Rate cuts are one of the Fed’s most powerful tools in combatting a Recession by giving out cheap money to companies to invest, but if rates are already super-low, their hands are tied. And none of that spells anything good. Trump argues lower rates now are essential to maintaining competitiveness, because lower rates puts more dollars into the system thus making it weaker against global currencies, which if you’re trying to sell more goods overseas is potentially a good short-term move. But there’s a good chance it could also backfire, especially if prices of products in the U.S. keep going up due to tariffs and other things.

So let’s look at the numbers in the monthly statement for May: after rising Treasury revenues in April, they plummeted.


  • Corporate tax revenues dropped to an insanely low level. Trump used rising corporate tax revenues last month as evidence his and Republicans’ $1.5-trillion tax cuts mostly to corporations were finally “paying for itself” as they always promised. But the new numbers indicate it’s not.
  • And China-tariff related money might’ve flowed into the Treasury’s coffers in April because Chinese companies were rushing to ship products to the U.S. before Trump’s additional tariffs kicked in. In May, that was one of the areas where revenues continued to climb, though not as much as the month before. Customs duties now running almost double to what they were last year.
  • In addition and finally, the Treasury took in about $10 billion less so far than it did last year. In May, it took in $232-billion, and laid out nearly $440-billion. That’s almost a complete reversal of April where the Treasury took in $535-billion, and spent $375-billion.
Green is revenues, blue is outlays, brown is comparison (source U.S. Treasury)

We’re sorry our publishing schedule has been so screwed up this week. We’ve been traveling and our internet access has been intermittent, and it’s probably going to be that way for another week. We’ll try to do better! Thanks, as always, for sticking with us.