The Federal Deficit Is Shrinking. Can That Last?

Since Donald Trump returned to the White House in January, the federal deficit has declined by $516 billion on a trailing-12-month basis. Spending is basically flat, but revenue is up a remarkable 8.5%. President Trump’s tariff barrage explains part of that increase, but rising personal income tax receipts — driven by the record-setting stock market and good times in general for high earners — have been an even bigger driver. Which raises the question: Can it last?

These numbers are from the Monthly Treasury Statement — the one for November was released last week — and they do have their quirks. The spending increase in October and drop in November was mainly a timing issue, for example, because Nov. 1 fell on Saturday this year and beginning-of-the-month payments went out at the end of October instead (which is why I say above that spending is basically flat, even though it isn’t on the chart).