So, no, there is no deficit reduction miracle. DOGE, tariffs, oil & gas revenues - all were supposed to balance the budget and pay off the debt.

Instead, big tax cuts and spending hikes pushed projected deficits towards $3T-$4T within a decade. Ignore the spin, watch the data.

Wait - Didn't DOGE drastically cut deficits in the second of half of 2025?

Haha, you're funny. The only evidence of DOGE savings is a $12 billion reduction in State Dept & foreign aid funding. And the IRS layoffs will cost more money than that in tax evasion and fewer audits.

That leaves $110 billion in higher revenues from tariffs in the second half of 2025. That is real - but also not guaranteed to last due to the courts, policy changes, and revenues lost to Americans switching out of imports. And its far smaller than the ballooning OBBBA cost.

Yes, the 2025-2H deficits were smaller than the 2H deficits in 2023 & 2024. That's also an accounting timing issue - the govt "booked" several years of OBBBA student loan savings in August & Sept. They didn't achieve the savings, they just counted the NPV ahead of time.

The problem? Monthly deficits *always* shrink in the second half of the fiscal year because the later April-Sept period includes big revenues from the April 15th tax deadline, and 3 of the 4 quarterly corporate tax due dates. Falling deficits are due to tax due dates, not policy.

Secretary Bessent brags that deficits fell from $1,307 billion in the first half of FY 2025 (Oct-Mar) down to $468 billion in the second half of the year (Apr-Sept).

He credits Trump's aggressive savings policies.

Yes, the final cost will be less than $20 billion (depending on what we do with the pesos and whether we can get full value dollars back), but even a $5 billion final cost could have saved millions of lives in Africa. Seems a higher priority to me.

It's a lazy gimmick to think we can keep cutting taxes and expanding spending and just pay for it by forcing the Fed to make government borrowing nearly free.

Politicians need to stop looking for easy, fake solutions and make the tough decisions on deficits. (/F)

Overall, fiscal dominance is a dangerous consequence to soaring debt - it paralyzes the Federal Reserve and kills its ability to slow inflation and stabilize the economy. We saw this after World War II.

If we want lower interest rates on the debt, back in the 2010s the Treasury missed the opportunitiy to lock more of its debt into 2-3% rates for 30 years. Some of us were screaming back then to do this.

In fact, inflationary cuts in the fed funds rate may raise - not lower - long-term interest rates.

Thus, I estimate even a *full-point* cut in the Fed funds rate would save maybe $44 billion next year. White House OMB data shows even less savings. That's out of a $7T budget.

$9 trillion of the federal debt will roll over in the next year, plus $2 trillion in new borrowing equals $11 trillion subject to new interest rates.

Also, the market determines the interest rate paid by the Treasury on its debt, and the Fed Funds rate has limited impact there.

First, yes, interest costs are burying the budget.
2021 - $352 billion
2025 - $1 trillion (approx)
2035 - $2 trillion (projected)

Interest has soared past Medicaid, defense, and Medicare to become the second-biggest item in the federal budget.

(And before you shout "easy, just the tax rich!", watch the video below. It can save some money, but nearly enough).

bsky.app/profile/jess...

America has a longer leash than France and the U.K. because were a huge, powerful economy and the world's reserve currency. But eventually, the laws of math and economics always win, and the chaos of France and Britain will head our way unless we get out ahead and reform.

Third, the last hope was that the resulting budget deficits could at least be funded with low interest rates.

Instead, interest costs have tripled to $1 trillion and are the 2nd largest budget item after Social Security - and may double again within a decade. So even more debt.

Second, retiring boomers and low fertility rates (and likely immigration limits) are strangling long-term economic growth by limiting the number of workers.

It means all growth must come from labor productivity, which itself is not great.

Which brings us to the U.S., and our deficits headed towards $4 trillion within a decade and as high as 250% of GDP within three decades.

First, the demographic challenge is raising senior benefit costs while limiting taxpaying workers.