Debt-Deficit Picture Is Now $1 Trillion Better Than Congressional Budget Office Thought

Tariffs “will reduce total deficits by $4.0 trillion altogether,” CBO says

Off by $1 trillion: The CBO has “updated” its estimates of tariff revenues in a Friday summer news dump, a classic way of trying to make sure something gets ignored.

Now they tell us.

The Congressional Budget Office, whose gloomy view of the long-term federal budget picture skewed public debate over the One Big Beautiful Bill, issued a trillion-dollar revision. It did so on a Friday afternoon (okay, 11:45 on Friday morning) in the summer during Congress’s August recess, on a day when economic news was dominated by Federal Reserve Chairman Jerome Powell’s Jackson Hole self-satisfied tribute to his own supposed “success in bringing down inflation without a sharp increase in unemployment.”

Back on June 4, when Congress was debating the One Big Beautiful Bill amid hotly contested estimates of its fiscal impact (see, “How ‘Big’ Is the One Big Beautiful Bill?” May 30, 2025), the CBO estimated the effect of the tariffs at a “$2.5 trillion decrease in primary deficits and $0.5 trillion reduction in interest outlays.” Now that it’s mid-August, about 10 weeks later, CBO has a revised estimate: “We project that increases in tariffs implemented during the period from January 6, 2025, to August 19 will decrease primary deficits (which exclude net outlays for interest) by $3.3 trillion if the higher tariffs persist for the 2025‒2035 period. By reducing the need for federal borrowing, those tariff collections will also reduce federal outlays for interest by an additional $0.7 trillion. As a result, the changes in tariffs will reduce total deficits by $4.0 trillion altogether.”

That’s a trillion dollar swing—to $4 trillion from $3 trillion—from June 4 to August 22.