Bessent Claims Tariff Revenues Will ‘Start Paying Down the Debt’

Happy Tuesday! It's National Soft Ice Cream Day! Also, National Potato Day. Our best wishes to all who celebrate. Here's what's happening on the fiscal front.

Bessent Claims Tariff Revenues Will 'Start Paying Down the Debt'

Treasury Secretary Scott Bessent said Tuesday that tariff revenues could be higher than expected this year, and the money collected could be used to make payments on the national debt, with refund checks for taxpayers being a lower priority.

"I've been saying that tariff revenue could be $300 billion this year. I'm going to have to revise that up substantially," Bessent told CNBC's "Squawk Box" morning show. "We're going to bring down the deficit to GDP. We'll start paying down the debt, and then at that point that can be used as an offset to the American people."

Bessent provided no further details on how high he thinks tariff revenues could go. The U.S. collected about $28 billion in customs duties in July, a big jump from the $8 billion collected in July a year ago. If that monthly level of revenue were to continue, the annual total would come to about $350 billion.

Trump administration officials have discussed various uses for the revenues, including reducing the budget deficit, paying down the national debt and providing a refund check to taxpayers.

Longer-term outlook: Experts caution that it's probably too early to reach any firm conclusions about total tariff revenues. Imports have surged recently as U.S. businesses - which pay the tariffs directly on imported goods before passing a portion of the cost onto consumers - rushed to obtain supplies before the tariffs imposed by President Trump took effect, boosting import revenues. Some analysts expect customs duties to fall back to some degree as the tariffs become more noticeable to consumers this fall in the form of higher prices. The tariffs also still face legal challenges that could invalidate them.

Economists at the Yale Budget Lab estimate that tariff revenues will come to $247 billion in fiscal year 2026. Over 10 years, the estimate for total collections comes to $2.7 trillion on a static basis, and $2.2 trillion on a dynamic basis once the negative economic effects of the tariffs are taken into account.

Even though those revenue numbers are large in historical terms, they are likely too small to have a significant effect on the national debt. The projected tariff revenues won't even cover the interest cost of the interest payments on the debt.

The net interest paid by the Treasury in July was roughly $90 billion, about three times the customs duties collected. Even if the annual tariff revenues were used to retire existing debt, they would still come to less than 1% of the total, which now exceeds $37 trillion.

Desmond Lachman, a senior fellow at the conservative American Enterprise Institute, told Fortune that the $300 billion in tariff revenues administration officials have highlighted "is a drop in the ocean in relation to the amount of red ink they've got." Joao Gomes, a professor of finance and economics at the Wharton School, said the tariff revenues could help offset the cost of the Republican tax cuts Trump signed into law, but, "The idea that [tariffs are] going to pay down the national debt is, of course, greatly overstating it."

Ratings agency pleased: While the tariff revenues may not put a dent in the national debt, they are making one of the three top ratings agencies breathe a little easier. S&P Global Ratings said late Monday that it has reaffirmed its AA+ credit rating for the United States, in part due to the higher customs duties collections. The announcement comes just a few months after Moody's Ratings downgraded the U.S. due to concerns about the size of the national debt and the potential damage from Trump's trade policies.

"Amid the rise in effective tariff rates, we expect meaningful tariff revenue to generally offset weaker fiscal outcomes that might otherwise be associated with the recent fiscal legislation, which contains both cuts and increases in tax and spending," S&P analysts said.

The outlook remains stable, the analysts added, with notable "revenue buoyancy" helping to offset "fiscal slippage" driven by tax cuts and spending increases: "The stable outlook indicates our expectation that although fiscal deficit outcomes won't meaningfully improve, we don't project a persistent deterioration over the next several years."

The analysts also provided a fairly pessimistic outlook on the prospect for meaningful improvement in the country's fiscal situation.

"Bipartisan cooperation to strengthen the U.S. fiscal profile--namely to meaningfully lower deficits and tackle budgetary rigidities--remains elusive," the analysts wrote. "However, we expect that cross-party negotiations on contentious issues, such as the government's debt ceiling--which has been raised or suspended on almost 80 occasions since 1960--will continue to be resolved in a timely fashion considering the severe consequences of not doing so on financial markets and on the economy."

After Legal Fight, Trump Administration Restores Spending Database

As the Trump administration and members of Congress continue to battle over the power of the purse, the White House has restored a public database that tracks federal spending, delivering a court-ordered victory for Democrats and two nonprofit government watchdog organizations that had sued after the government website was taken down. But the restored data highlights the ways in which President Trump and his budget office, led by Russell Vought, are trying to exert control over federal spending.

"It's clear now why Vought and Trump have fought so hard to prevent this information from being public: They have used this process to secretly and illegally exert even more control over funding approved by Congress, freezing key investments from going out the door for agencies to conduct critical work and help the American people," Sen. Patty Murray, the top Democrat on the Senate Appropriations Committee, said in a statement Monday.

How we got here: A pair of laws enacted in 2022 require the White House Office of Management and Budget to publicly disclose all decisions about how to allocate congressionally approved funds, known as "apportionments," and to do so within two business days.

The website had been up since July 2022, but the Office of Management and Budget took it down this past March, raising alarms among lawmakers and government watchdogs. Vought told lawmakers that the budget office would no longer maintain the system because it "requires the disclosure of sensitive, predecisional, and deliberative information." He argued that some of the information could threaten national security and foreign policy and that the required disclosures "have a chilling effect on the deliberations within the Executive Branch" and undermine the budget office's effectiveness in overseeing spending.

Two non-partisan, non-profit groups - Citizens for Responsibility and Ethics in Washington and the Protect Democracy Project - sued. The U.S. District Court for the District of Columbia ordered the site restored, and earlier this month a federal appeals court panel ruled unanimously against an administration request to put a hold on that ruling, saying the administration had to put up the site and all the data that hadn't been made available. OMB restored the site on Friday night.

"It should never have required months in court for this administration to begin complying with a truly basic and straightforward transparency requirement," Murray said in her statement. "OMB must now ensure every last bit of this important budget data that has been hidden is promptly made public, as the court has ordered, and that the data is posted within days, as the law requires, going forward."

Why it matters: The fight over making apportionment information public is one element of a larger battle in which Vought and the Trump administration are looking to assert more control over federal spending and challenging Congress's power on funding decisions. The administration has cut off funding approved by Congress for a range of programs.

"Apportionments show how OMB is implementing federal spending laws - or potentially impounding funds in violation of the law," Protect Democracy said in a statement Monday. "Apportionment information is essential for Congress, journalists, and members of the public seeking to better understand how federal tax dollars are being spent. Public information about apportionments is critical now as the Trump administration continues to illegally withhold funding from federal agencies - including funds agencies must spend by September 30th."

What the push for transparency reveals: Protect Democracy said it and others are working to analyze the new data to ensure all the required information is available. At the same time, The Washington Post reports that the newly available documents "show Trump's budget office is imposing litmus tests on releasing money - demanding plans from agencies to show they are following guidance Trump has laid out in executive actions, such as avoiding spending on diversity programs."

The documents reportedly show that OMB has blocked some funding until agencies deliver a spending plan approved by the White House or prevented spending that doesn't align with Trump's orders.

"The restrictions effectively give Vought, the director of the White House budget office and an architect of the controversial conservative governing plan Project 2025, the power to approve or deny virtually all spending decisions," the Post's Riley Beggin and Jacob Bogage write.

Vought and the administration have argued that a 1974 law that restricts the president's power to withhold congressionally approved funding is unconstitutional.

Fiscal News Roundup

• White House Restores Spending Database It Sought to Keep Secret – Roll Call
• Trump Budget Officials Claim Sweeping Spending Power From Congress, Records Show – Washington Post
• Bessent Says US Tariff Revenues to Rise 'Substantially,' Focus on Reducing Debt – Reuters
• Trump Tariffs Get Seal of Approval as S&P Affirms Credit Rating – Bloomberg
• S&P Affirms U.S. Credit Rating as Tariff Revenue Expected to Plug Fiscal Leaks – Wall Street Journal
• Trump Expands 50% Steel and Aluminum Tariffs to Include 407 Additional Product Types – CNBC
• Lutnick Says Intel Has to Give Government Equity in Return for CHIPS Act Funds – CNBC
• Trump Offers 'Assurance' U.S. Won't Send Ground Troops to Ukraine – Washington Post
• Conservative Roadmap Targets Medicaid, Student Loans for Trump's 'Big, Beautiful' Sequel – Fox News
• Trump Administration Cancels Annual Employee Survey Amid Civil Service Tumult – Washington Post
• The Race to Rescue PBS and NPR Stations – New York Times
• National Guard Troops From GOP-Led States Begin Arriving in DC as Part of Trump's Crime Crackdown – CNN
• Trump Escalates Attacks Against Smithsonian Museums, Says There's Too Much Focus on 'How Bad Slavery Was' – CNN

Views and Analysis

• Economic Data Has Taken a Dark Turn. That Doesn't Mean a Crash Is Near – Lydia DePillis, New York Times
• Trump May Expand His Revision of U.S. Capitalism – By Andrew Ross Sorkin et al., New York Times
• No, Trump Is Not Ushering in a New Global Trading Order – Inu Manak, Financial Times
• It's a Run to Hedge the Dollar, Not a Run on the Dollar – Robin Wigglesworth, Financial Times
• America's Coming Crash – Kenneth S. Rogoff, Foreign Affairs
• What the Economy Really Looks Like – David Dayen, American Prospect
• Chipotle and Shake Shack Help Solve an Economic Puzzle – Conor Sen, Bloomberg
• The Clock Is Ticking on Deciphering the Job Market Slowdown – Neil Irwin and Courtenay Brown, Axios
• I've Seen What Happens When a Country Messes With Data. America, Beware – Andreas V. Georgiou, New York Times
• American Housing Policy Needs a Gut Rehab – Washington Post Editorial Board
• The White House Is Making the Homeless Crisis Worse – Jacob Fuller, Washington Post
• The Nationalization of Intel? – Wall Street Journal Editorial Board