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Donald Trump’s congressional allies have a very big fiscal arithmetic problem that has yet to become entirely visible to debt-and-deficit hawks, financial markets, and the public at large. He has promised, and his party’s donor base really wants, an extension of the tax cuts he pushed through Congress during his first term. That will cost a minimum of $4.5 trillion over ten years, if they are made permanent, according to the center-right, business-friendly Tax Foundation, and with interest costs, would add $5.4 trillion to the national debt. Much as tax cuts often sound like dessert to voters, they seem to want Congress to eat broccoli first, according to a USA Today–Suffolk poll taken just before Trump took office:
Trump has said that one of his first legislative initiatives will be to extend and expand the tax cuts passed in his first term, now set to expire after this year.
But in the survey, a 53% majority of voters said Congress should focus on cutting the federal budget deficit, even if it meant not extending the tax cuts. Just 28% said Congress should extend the tax cuts even if it means increasing the deficit. …
Enthusiasm for tax cuts was relatively restrained even among Republicans: 46% put a higher priority on cutting taxes, and 38% on curbing the deficit.
To the extent that the 2017 tax cuts showered the most benefits on wealthy individuals and the corporations they run, it’s worth noting that polls regularly show voters across party lines believe these beneficiaries of Trump 1.0 largesse are not bearing their fair share of the tax burden. Now it’s true that on the 2024 campaign trail, Trump promised additional tax cuts that are popular among people who could not possibly get across the security barriers at Mar-a-Lago. He proposed eliminating federal income taxes on tips, overtime pay, and Social Security benefits. Unfortunately, the deficit-focused Committee for a Responsible Federal Budget estimates these swing-voter-pleasing tax cuts could cost as much as another $5 trillion. Trump is also backing, and key House Republicans are demanding, more federal income-tax deductions for state and local tax expenditures. These could cost as much as $1.2 trillion more, according to CRFB.
Keeping all these promises without ballooning the federal budget deficit to unprecedented levels is made more complicated by the Trump-GOP drive to increase spending on national defense and border security, priorities reflected in both the House and Senate budget resolutions already passed.
Of course, congressional Republicans and the administration agree on the desirability of domestic spending cuts that don’t contradict Trump’s pledges not to cut Social Security and Medicare benefits, or perhaps even Medicaid benefits, depending on which promises you actually believe. Republicans even hope they can pocket some of the savings wrung out of the federal bureaucracy by Elon Musk’s DOGE raids on agency programs and personnel, though these, too, are becoming more unpopular every day.
So Republicans in Congress are very interested in fresh ways to make it all add up. And Trump has a ready suggestion: tariffs! Despite considerable conservative and business-sector opposition to the 47th president’s long-standing protectionist trade agenda, those worried about debt and deficits are listening, as Politico reports:
GOP leaders and President Donald Trump are strategizing over how to incorporate revenue from new tariffs in their massive party-line domestic policy bill, with the goal of arguing the multitrillion-dollar legislation doesn’t add to the national debt.
Speaker Mike Johnson, Senate Majority Leader John Thune and other senior Republicans discussed the topic during their White House meeting Wednesday, according to two people familiar with the meeting. Republicans are still planning to keep the tariffs outside the final reconciliation package. But the group discussed how to score and eventually count the revenue as part of their plans for a deficit-neutral bill.
In other words, congressional Republicans won’t take on a battle to enact new tariffs, but they’ll be happy to claim the revenues from tariffs Trump imposes via presidential orders to help meet his tax-cut promises. And sure enough, as the same Politico story reports, Trump followed up his meeting with Speaker Mike Johnson and Senate Majority Leader John Thune by announcing that new 25 percent tariffs on goods from Canada and Mexico will go into effect on March 4.
This gambit may help with the GOP’s fiscal arithmetic, but it doesn’t help with the politics. Trump may believe that “tariff is the most beautiful word in the dictionary,” but aside from the deep hostility to tariff wars felt by free-market economists and multinational corporate interests, the public’s not that jazzed. Polls show there is significant support for tariffs on China, but not so much on Canada, Mexico, or Europe. And despite Trump’s claim that tariffs will be paid by foreigners, polls also show that solid majorities of Americans agree with economists that increased tariffs will boost consumer prices right here in the United States. Given the extreme sensitivity of Americans to the cost of living — arguably the preeminent issue that returned Trump to the presidency in 2024 — this is one Trump priority that is especially dangerous.
Beyond the unpopularity of tariffs as a way to pay for relatively unpopular tax cuts, there’s a logical problem as well: If tariffs work to win concessions from foreign countries or succeed in convincing companies to relocate operations to the U.S. to avoid tariffs, then they won’t raise the revenues Republicans are already counting upon. If they do raise revenues, they will be paid not by foreign companies but by the American consumers who will pay increased prices for both foreign goods and for domestic goods that will be insulated from low-cost competition. If Trump tariffs work economically, they won’t work fiscally. So as an answer to the Republican craving for offsets to tax cuts, they don’t fill the bill. And in the longer run, tariffs will reinforce the extremely dangerous impression that Trump is bent on replacing progressive income taxes with highly regressive levies on everyone who goes to Walmart and expects lower prices for items America just doesn’t produce efficiently anymore.
