Don’t Believe the Rhetoric about Tariffs, the Department of Government Efficiency (DOGE), and the Desire to Reduce the Deficit.
I was motivated this morning by an article in the Washington Post about tariffs and the Department of Government Efficiency. They are not the be all and end all that Trump is saying they will be. Here are the facts and my thoughts on tariffs, DOGE, and the deficit.
Net Impact of Tariffs on the Federal Deficit.
Today I asked ChatGBT the following question. What impact do tariffs have on the federal deficit when taking into account all the factors?
Here is the summary of the answer provided by ChatGBT.
The impact of tariffs on the federal deficit depends on:
- The magnitude of tariff revenues.
- The extent of economic distortions caused by the tariffs.
- The scale of any retaliatory measures or policy offsets.
- The sensitivity of consumer and business behavior to higher costs.
While tariffs can provide a short-term revenue boost, their broader economic effects often undermine long-term fiscal health, making them an unreliable tool for deficit reduction. Economic analyses frequently find that tariffs tend to hurt overall economic output, which is ultimately detrimental to federal revenue collection.
Question of the Day: The Deficit in 2023 was 1.68 trillion in 2023. Can the New Department of Government Efficiency (DOGE) Balance the Budget through Expense Reduction?
We all know there is waste in our federal government. More power to DOGE if they can get rid of the waste, but don’t think for one second that DOGE is going to make a noticeable dent in the annual budget deficit. Here are the facts.
For 2023:
Revenue
Individual Income Tax= 2.2 trillion
Payroll Taxes= 1.6
Corporate Taxes 0.4
Customs, Excise Taxes, Other Inc.= 0.3
Total Revenue 4.5 trillion
Expense:
Social Security 1.4
Medicare 0.9
Defense 0.8
Debt Payment 0.7
Medicaid 0.6
Assistance to Individuals 0.5
Transfers to States 0.5
Veterans Affairs 0.3
Other 0,8
Total Expenses 6.2
Deficit 1.7
Analysis of Expense Categories
Social Security: Trump has said he will not touch it.
Medicare: Trump has said he will not reduce the benefits. The cost of providing healthcare continues to rise. There may be some savings in payments to providers, but the healthcare lobby will make it hard to get the votes in congress. They will be lucky to keep expenses growing no greater than the level of overall inflation. No reductions here.
Debt Payment: The deficit is going up. This will only come down if interest rates come down. No reductions here.
Defense: There is probably some savings, but what Republican congressmember is willing to go on record in voting for reductions in defense expense budgets. Trump wants to increase the country’s military might. Not likely to see any reductions here.
Medicaid: Since the cost of healthcare continues to rise, the only way to cut expenses is to reduce benefits or reduce payments to providers. Not only will the healthcare industry fight this reduction, but so will all the social agencies and nearly every Democrat. This will have a direct affect on some of the demographic areas where Trump made gains in the last election. Reductions here will probably cost Republicans tremendously in the mid-term elections. Minimal reductions here.
Assistance to Individuals: The answer here is the same as the one above for Medicaid.
Transfers to States: I am sure there are possibilities here, but so much of this goes to infrastructure. Since most of the states are “red” states, it will be hard to get support in congress if “red” states are negatively impacted. Furthermore, the Biden investment of infrastructure, which accounts for a portion of the transfers, has reduced unemployment. Reductions run the risk of increasing unemployment. This will be a hard sell in congress. Minimal reductions here.
Veterans Affairs: Reductions here go against Republicans commitment to the military. Veterans have been strong supporters of Trump. Any reductions here will require out of the box thinking and a mass marketing campaign. Minimal reductions here.
Other: I am sure there are saving here, but you can be assured that it will be a fight to get congress approval without costing Republicans in the mid-term elections. Minimal reductions.
DOGE has limited ability to cut expenses if congressman want to get re-elected. If it was easy, it would have been done a long time ago.
To balance the budget, it will take politicians who are willing to raise taxes, reduce expenditures, and grow the economy while keeping inflation and interest rates low. Eventually it will need to be done, but I do not see it happening anytime soon.
Deficits by President
Presidential candidates and congressmembers always talk about how we need to get the deficit down and how we need to balance the budget. Yet no president in my lifetime has done it. The only time we have had a budget surplus in my lifetime was for the last four years of Bill Clintons presidency in which he partnered with Speaker of the House Newt Gingrich to make changes in the way the country spends money. Those changes were quickly erased 9/11 and the takeover of Iraq.
Here are the deficits by president from Ronald Reagan to Joe Biden.
Ronald Reagan: Total = 1,156.2 billion avg per year = 144.5
George HW. Bush 1,035.6 258.9
Clinton 469.2 58.6
George W. Bush 3,546.6 443.3
Obama 6,527.3 815,9
Trump 7,667,0 1,916,7
Biden 3,060.0 1,530.0
Note: Biden is only for two years.
The facts speak for themselves. The deficit is here to stay until something is forced on us to deal with it.
Conversion to Substack
Some of my original followers who signed up on the Blue Host/WordPress platform have also been signed up on the new platform Substack. As a result, they have been getting duplicates of my blog. Over this coming weekend, I will be cancelling people off the Blue Host platform so starting next week they will only be getting the post through the Substack platform.
Thank you for your understanding and patience as I make the transition to Substack.
Have a Great Thanksgiving
This will be my last blog for the week. I will be out of town until late Friday celebrating Thanksgiving with my family at Katy’s. I hope everyone has a great Thanksgiving.
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Quote of the Day: “This idea of purity and you’re never compromised and you’re always politically woke and all that stuff — you should get over that quickly. The world is messy. There are ambiguities. People who do really good stuff have flaws.” Former President Obama.
Orchid of the Day: The ceasefire between Lebanon and Israel which was announced today. Step one completed.
Onion of the Day: Winter. It is arriving in Petoskey.
Question of the Day: Can the New Department of Government Efficiency (DOGE) Balance the Budget through Expense Reduction? See story above.
Video of the Day: Calls of the Game: Detroit extends win streak to 9 after a 24-6 win in Indianapolis | Lions at Colts
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