Deficit reduction may be difficult but cannot be avoided

Trade adviser Peter Navarro had projected that they would yield revenues of US$600 billion a year, or at least US$6 trillion over a decade, which would more than cover the cost of the tax cuts.

- 

FROM B1 trade adviser Peter Navarro had projected that they would yield revenues of US$600 billion a year, or at least US$6 trillion over a decade, which would more than cover the cost of the tax cuts. With the tariffs now reduced and used as a bargaining tool rather than a revenue generator — and they are highly unlikely to revert to the stratospheric levels of April 2 — Mr Navarro's revenue projections are turning out to be a fantasy.

Initiatives on the expenditure side did not work out as planned either. Major spending cuts were supposed to result from the actions of the so-called Department of Government Efficiency (Doge) which was, until recently, led by the billionaire entrepreneur Elon Musk.

Mr Musk, who had brandished a chainsaw to demonstrate his intent, had bragged that at least US$2 trillion could be saved by eliminating wasteful spending. He and his crew of young coders started with all but abolishing the US Agency for International Development, which administers foreign aid. They then went on to slash manpower and freeze spending at several federal government agencies and departments.

But the result was chaos: operational disruptions, lawsuits and pushback from not only political opponents but even from within the Trump Cabinet. Eventually, Mr Musk went back to running his businesses, which had been threatened by consumer boycotts and cancelled contracts, leaving Doge rudderless.

He claimed that his efforts had saved US$160 billion in expenses, which amounted to just 8 per cent of the original estimate of US$2 trillion, but even that is widely considered dubious. Independent analyses suggest that the claimed savings may be overstated or lack verifiable documentation.