With borrowing unleashed, and tariffs offering little more than political cover, Washington is sprinting toward a cliff edge.
F or the first five months of Donald Trump’s second term, the federal government’s outlays were roughly in line with what the Biden administration had spent over the same period the year before. Then July arrived, and the illusion was shattered.
In that single month, the federal government spent $56 billion more than it had in July 2024 — an increase of about 10 percent. The monthly deficit alone came close to $300 billion, pushing the year-to-date total beyond $1.6 trillion. At the current pace, America will breach the $2 trillion deficit mark by the end of the fiscal year.
The truth is that this apparent early restraint had nothing to do with discipline. It was an artifact of the debt ceiling. In January, the ceiling, suspended under the Fiscal Responsibility Act, was reinstated. With the cap back in place, the Treasury had to resort to “extraordinary measures” to avoid default. The brakes were not being applied by policymakers out of principle; they were jammed on by law.
Everything changed on July 4, when President Trump signed the One Big Beautiful Bill Act, which raised the debt ceiling by $5 trillion. The move was sold as a pragmatic necessity to restore “flexibility” to the Treasury. In reality, it opened the floodgates. Since late June, debt held by the public has surged by almost $800 billion, catching up with the continued reality of Washington’s profligacy.
Supporters of the administration insist that spending will be offset by a new revenue bonanza from tariffs. The numbers tell a different story. Customs revenues have indeed risen in recent months, but the scale is small compared with federal outlays. Averaging the additional monthly tariff revenue from May, June, and July yields about $19 billion a month. For perspective, the federal government spent $630 billion in July alone, meaning a year’s worth of extra tariff revenue would keep the government running for less than twelve days.
Even this meager offset disappears once the economic damage is accounted for. The trade war’s costs will fall on households. Estimates vary, but if the full scope of Trump’s tariffs stays in place, the average household could face a $1,200 tax hike and be $2,400 poorer next year when higher prices are factored in. The wider economy will also suffer, with real GDP projected to be half a percentage point lower in both 2025 and 2026. That slowdown will erode tax revenues across the board, including annual tariff receipts, which would be cut by an estimated $48 billion. Adjusted for these feedback effects, tariffs will cover only nine days of spending, rather than twelve.
Meanwhile, the deficit is heading toward a level that will make previous years’ borrowing look modest. Markets have been remarkably tolerant so far, but that is no guarantee they will remain so. The U.S. is piling on debt faster than at almost any point outside a war or recession, yet the political conversation is consumed with trivia.
The administration’s tariff policy cannot disguise the scale of the red ink. The numbers are too large, the arithmetic too simple. Even if the tariffs raised hundreds of billions in new revenue, they would still fall far short of plugging a $2 trillion deficit, and they would do so at the cost of slower economic growth.
Unless something changes, the next few years will see debt climb above 100 percent of GDP, with interest payments consuming an ever greater share of the budget. By then, the question will not be whether Washington can afford another spending surge. It will be whether it can afford the interest bill on the surges it has already made.
The temporary calm of early 2025 was an illusion created by the debt ceiling, not a new era of thrift. With borrowing unleashed, and tariffs offering little more than political cover, Washington is sprinting toward a cliff edge.