The hard truth: Why tariffs and tax cuts can't outrun America's debt clock
By: Ted Jenkin (Fox News)
As usual, the analysis omits local and state government. Total government spending (local + state + Federal) is actually about $13 trillion annually and growing each year. As the Federal budget hawks whittle away at Federal programs, local and state governments are carrying more of the burden for discretionary spending.
Over time this has increased competition between local, state, and Federal governments for tax revenue. At present government at all levels are extracting ~ $11 trillion from the economy. That's about 35% of GDP which is well above the normal trend over the last half century. And the revenue burden for all levels of government is expected to increase to ~ 40% of GDP before the end of the decade.
The last half century of financialized supply-side economic policy has created a number of obvious and hidden feedback loops that threaten the entire system.
S E E D E D C O N T E N T
Every four years, Americans fall in love with a fantasy. A new president will change the federal deficit.
Republicans promise growth will outrun the debt.
Democrats promise taxes on the rich will fix it.
And the U.S. Debt Clock keeps spinning like a Vegas slot machine that only pays out in red ink.
As of 2026, the United States owes roughly $38.5 trillion, and it's climbing about $8 billion per day. The net interest payments on the debt officially exceed our annual defense budget.
We're not arguing politics anymore. We're arguing arithmetic.
The Trump Plan: Growth + Tariffs + Tax Cuts
Let's be fair: Trump's economic philosophy has been consistent since he started campaigning.
Extend tax cuts — no tax on tips, overtime or Social Security.
Add tariff revenue — now a political and legal battle.
Shrink bureaucracy — started with DOGE.
Grow GDP faster than spending — up only 1.4% last quarter.
That worked sort of well when debt was $20 trillion lower and interest rates were near zero.
But today's numbers are very different.
The Congressional Budget Office estimates current policy paths keep deficits near $2 trillion annually and push debt to about 120% of GDP within a decade.
Here's the translation. Even if the economy hums at an insane rate of GDP growth, the government is still spending dramatically more than it collects. Why is it that nobody really understands revenue and expenses in Washington, D.C., and that 85% of our revenue comes from the two buckets of personal income tax and payroll tax?
The Real Problem Isn't Taxes or Tariffs. Here's the 60-second explainer.
It's interest. Lots and lots of interest. Interest on the debt alone is projected to exceed $1 trillion in 2026 and now roughly 14% of federal spending.
That means before we fund:
Defense
Social Security
Medicare
Infrastructure
Our Veterans
It's like playing credit card roulette and the interest just keeps compounding with no end in sight. No State of the Union message Republican or Democrat can outgrow a compounding interest bill this large.
Politicians Don't Like To Campaign On Math
Last fiscal year:
Government spent: $7.01 trillion
Government collected: $5.23 trillion
Annual deficit: $1.78 trillion
To erase the deficit overnight, you would need one of the following:
• Raise taxes roughly 35% (think about top tax rates going from 37% to 50%) and remember almost half the people in America don't pay federal taxes whatsoever.
• Cut benefits massively, which really means one of the big three: Medicare, Social Security or Defense.
• Or grow the economy at wartime levels for a decade.
Do any of those sound realistic to you?
Why Trump Unfortunately Can't Fix It (And Neither Can Anyone Else Alone)
Even Trump's policies which add tariff revenue are projected to still increase deficits over time because tax cuts reduce revenue faster than tariffs raise it.
Here's the uncomfortable truth we all need to face. America does have policy problems, but more importantly, America has a promises problem. Nobody wants to sacrifice anything, and when you are in debt, something has to be sacrificed to get out of debt.
The Real State Of The Union
The federal debt isn't going to be eliminated.
It will be inflated away, written off, monetized, or slowly eroded by negative real interest rates because, mathematically, a $38.5 trillion balance sheet cannot be balanced with incremental policy tweaks. The U.S. doesn't default. It dilutes.
Presidents don't control the deficit anymore. Trump can change tax policy. He already did it. Congress can try to change spending. But they rarely agree. But reality is reality. Changing this quickly is like turning the Queen Elizabeth around in a bathtub.
Unless America changes expectations or sacrifices are made on both sides of the aisle, the debt clock keeps running no matter whose name is on the Oval Office door. The debate in Washington is ideological. The risk to all of us is our standing to wear the crown of being the world's currency.
Ted Jenkin is President of Exit Stage Left Advisors and Host of The Red, White & Green Show.
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Good article. Well laid out.
The fiscal hawks want to ignore how their Federal spending cuts, deregulation, and tax cuts only pushes the problems down to the local and state level of government. Shrinking Federal programs and deregulation only shifts the need for government support down to the local and state level of government. That's why local and state government spending has grown to almost match Federal spending. The fiscal hawks actually worsen the problem because Federal spending cannot be cut enough to cover proposed tax cuts. The Federal program cuts and deregulation only exacerbates competition for revenue between local, state, and Federal governments.
The methods employed by fiscal hawks have financialized the economy which interferes with creation of tangible value to underwrite the national debt. The folly of fiscal hawks has starved the economy of asset creation to fuel cash flow. That has created a number of feedback loops that are now interacting with each other in ways that will be difficult to control.
Republicans run on balancing the budget then run up our debt like hookers with our credit cards...
Raise taxes roughly 35% (think about top tax rates going from 37% to 50%)
Even if there were no negative effects on the economy and no avoidance, that would only make a small dent in the deficit.
It's impossible to tax our way out of the problem without massive tax increases on the middle and lower classes, which would also cause economic chaos.
Local and state governments are already taxing their way out of fiscal problems. That's why the tax burden for all levels of government has increased to 35% of GDP. Any benefit from Federal tax cuts is being eaten by local and state tax increases. It's not rocket science. Federal cuts to discretionary spending only pushes the burden down to local and state governments.
The quick fixes advocated by Federal fiscal hawks only rob Peter to pay Paul.
Americans like to think about our budget like we think about weight loss.
Deep down we know what needs to be done, but that's hard so we're going to ignore that and pretend some other obviously nonsensical method will get us there.
I don't need to eat less and exercise, I just need to buy the magic belt from Ronco that does sit-ups for me.
To be fair, we're remarkably consistent with this method. We use it for education, healthcare, social security, racism, income inequality, wealth inequality, and anything else that requires discipline.