Macro economist Lyn Alden warns tariffs won’t stop U.S. debt spiral

Core Insights - The U.S. government's renewed use of tariffs is seen as a significant tax increase, which may help reduce the deficit in the short term but does not address the long-term debt trajectory [1][2] - U.S. tariff revenue has increased significantly, reaching $165.2 billion in FY 2025, with projections suggesting it could exceed $300 billion by year-end [2] - Despite the increase in tariff revenue, the U.S. remains structurally locked into high deficits, with federal spending exceeding $7 trillion annually against an income of approximately $5 trillion, resulting in a persistent $2 trillion gap [5] Tariff Impact - Tariffs are described as the largest tax increase in decades, effectively increasing taxes rather than cutting spending to reduce the deficit [2] - The current national debt stands at $37.4 trillion, approximately 119% of GDP, with $30.1 trillion held by the public [2] Structural Fiscal Challenges - The U.S. faces entrenched fiscal challenges, as even record tariffs only cover a small fraction of the deficit [3] - Deficits as a percentage of GDP remain historically elevated, with only minor fluctuations expected [5] - Debt service costs are becoming a critical factor in the overall fiscal situation, contributing to the increasing debt burden [6] Historical Context - The roots of the U.S. debt problem can be traced back several decades, with a significant increase in debt occurring alongside a decline in interest rates over the past 40 years [8]