At Reuters David Lawder reports:
WASHINGTON, Jan 13 (Reuters) – The U.S. government posted a $145 billion budget deficit for December, up 67% or $58 billion from a year earlier due to record outlays that were inflated by calendar shifts in benefit payments and receipts, the Treasury Department said on Tuesday.
The report showed that revenue growth from President Donald Trump’s tariffs may have plateaued, as December net customs receipts totaled $27.9 billion, down from the low $30 billion range in recent months but far above ?the $6.8 billion recorded in December 2024.
Net customs receipts for the first three months of fiscal ?2026, which started October 1, totaled $90 billion compared to $20.8 billion in the prior-year period.
The Trump administration implemented some tariff-cutting trade deals in November, including 10 percentage-point reductions in duties on imports from China and South Korea. The Supreme Court also ?could soon rule on legal challenges to Trump’s tariffs under an emergency sanctions law. A ruling against those duties would further cut customs receipts.The Treasury said that after making adjustments to December budget results in both 2024 and 2025, the December deficit would have been $112 ?billion, a decrease of $14 billion or 11% from the December 2024 budget gap.
Not to belabor the point but large deficits are a foreseeable consequence of cutting taxes without politically or structurally credible mechanisms for trimming expenditures. With entitlements on demographic autopilot, interest expense rising, and defense spending politically insulated, the notion that tax cuts would be offset by spending restraint was always fanciful. The pre-existing debt overhang already impedes economic growth by crowding out private investment and increasing the sensitivity of the budget to interest-rate shocks so you can’t expect to grow your way out of the issue. That is an empirical finding by economists that remains robust in mainstream literature.
These fiscal realities are not an abstraction. They are directly related to what Democrats frame as their “killer issue” in the 2026 and, possibly, 2028 elections: affordability.
When deficits are effectively monetized, i.e. financed through central bank balance sheet expansion rather than real resource growth, the result is inflation. When goods and services inflation outpaces wage inflation you have an affordability problem. It is always regressive: it hits renters, younger households, and fixed-income retirees first and hardest.
This is not a pathology unique to one party; it is the product of decades of bipartisan normalization of deficit finance in the service of short-term political objectives.
Depends on how which timeframe to look at.
https://www.bloomberg.com/news/articles/2026-01-13/us-deficit-shrank-to-1-7-trillion-in-2025-thanks-to-tariff-jump
“The US budget deficit shrank to $1.67 trillion for the 2025 calendar year, the smallest in three years, thanks mainly to a record surge in customs revenue…”
Month to month, the figures oscillate too much so the headlines are junk. A yearly basis (whether fiscal or calendar) is more accurate for understanding trends.
The budget deficit (adjusted for timing shifts) was about 4% lower in fiscal 2025 then fiscal 2024. The CBO is projecting the deficit will be around $1.7 trillion for fiscal 2026 (slightly smaller then fiscal 2025 nominally) or 5.5% GDP.
I doubt the deficit can be closed to 3% of GDP without serious reforms of entitlement programs. Tariffs was already among the biggest tax raises in the last 50 years and look at how difficult that was.