Despite $27 Billion Surplus in June, More Fiscal Reforms Are Needed

The U.S. Treasury Department announced Friday that the federal government ran a surplus of $27 billion in June, raising hopes that Washington may have turned a corner away from debt-bound demise. The month-in-black marked the first June surplus since 2017, the beginning of President Donald Trump’s first term, and it improved substantially upon the $71 billion deficit the government ran in June 2024. However, while the monthly surplus is a positive sign, the U.S. government is not out of the woods just yet.

Administration officials credited Trump’s tariffs for the budget surplus. “Another promise made. Another promise kept,” tweeted Treasury Secretary Scott Bessent. “As President Trump works hard to take back our nation’s economic sovereignty, today’s Monthly Treasury Statement is demonstrating record customs duties — and with no inflation!” Indeed, the U.S. government collected some $27 billion in customs duties in June, a number strikingly close to the surplus.

Does this result signal that tariffs are the solution to America’s excessive federal debt?

The short answer is no, because the reality of government finances is far more complex.

To explain this, it’s helpful to begin with a definition. As many readers will already know, a surplus occurs when total income (receipts) exceeds total expenses (outlays). Last month, the federal government brought in $526 billion (a $60 billion increase, or 13%) and spent $499 billion (a $38 billion decrease, or 7%).

Right away, these figures make it apparent that the total surplus ($27 billion) was less than the decrease in outlays ($38 billion) and less than half the increase in receipts ($60 billion). Even though tariff income roughly equaled the surplus, it was not the largest factor in June’s budget result.

The decrease in outlays was primarily due to “calendar adjustments,” which happen when payments are made a few days earlier or later than normal, the Treasury Department acknowledged. Since June began on a Sunday, any payments due by June 1 would have been paid on the previous business day, Friday, May 30; these payments would therefore count towards May’s total, instead of June’s. Without these calendar adjustments, June would have registered a $70 billion deficit, the Treasury Department noted. (That’s a remarkably high discrepancy of $97 billion, or roughly 20% of all outlays, but there is also a remarkably high percentage of payments due on the first day of the month.)

The increase in receipts was also due primarily to non-tariff-related factors. While customs duties in June totaled $27 billion, they also brought in $23 billion in May, resulting in an increase of $4 billion. That means most of the $60 billion increase in revenue was raised from other sources, likely quarterly tax payments. “June is one of Treasury’s biggest revenue months of the year,” wrote The Wall Street Journal editors, “because it’s a month when companies and individuals file their quarterly estimated tax payments.”

This raises another essential point, which is that balancing the budget requires responsible spending across all 12 months of the fiscal year, not just a surplus in certain high-revenue months. Before the June surplus of $27 billion, the U.S. federal government ran a deficit of $316 billion in May, with nearly as much income from tariffs. For the current fiscal year, which began in October, the government has run a deficit of $1.34 trillion. In comparison, June’s surplus is little more than a rounding error (technically, $0.027 trillion).

“June was the highest monthly level so far [for customs duties],” the WSJ editors allowed, “but even on an annual basis that’s about $300 billion a year. That’s not nothing, but it won’t balance a $7 trillion spending budget.”

However, the effort to relate tariff revenue to the budget surplus does underscore one obvious point: the path to balancing the budget requires both more taxes and less spending. (Tariffs are a tax on imported goods.) Politicians don’t like to talk about this reality because both items are unpopular, but there’s no way around it, just like a family may be forced to both cut expenses and produce extra income (perhaps through a side hustle) to make ends meet.

Unfortunately, taxes have other ill effects. In economic terms, all taxes reduce efficiency by driving prices way above the supply-demand equilibrium, resulting in lost productivity known as “Dead Weight Loss.” Of course, taxes are necessary to support government, which God instituted as a means of common grace, and Scripture instructs Christians to pay their taxes (Matt 22:15-22; Romans 13:7). Nevertheless, taxes siphon off economic resources, making it beneficial to keep them as low as possible.

Already, the effect of tariffs may be slipping into U.S. inflation statistics. The Consumer Price Index (CPI) increased 0.3% in June, after increasing 0.1% in May, for a 2.7% increase over the past 12 months, reported the Bureau of Labor Statistics (BLS) on Tuesday. Subtracting the volatile categories of food and energy, the “core” CPI increased 0.2% in June and 2.9% over the past 12 months.

While overall inflation numbers were only slightly higher than average, prices increased sharply in categories that are heavily dependent on foreign imports. For instance, apparel prices increased 0.4% in June, while household furnishings and appliances increased a whole 1.0% in a single month. Even pro-Trump Breitbart News attributed these increases to tariff pressures.

(In fairness to the administration, Trump’s tariffs have caused far less inflation than some critics have predicted, as Bessent recently pointed out. However, this is partly due to the fact that the higher tariff rates have yet to take effect for many countries.)

In addition to fueling inflation, tariffs (like all taxes) will also reduce economic activity. Even when taxes are beneficial, such economic downsides are inevitable. Thus, the simplest solution is for the government to avoid spending money it doesn’t have in the first place.

Alas, such warnings have gone unheeded for decades. Given the depth of the fiscal hole the U.S. government has dug for itself, there are no easy ways out — not tariffs, not DOGE cuts, not rescissions. Only hard, deep, and painful cuts — such as serious entitlement reform — can set the nation on the path to fiscal sustainability. And that is unlikely to happen until voters, like they did in Argentina, are willing to listen to real solutions.

AUTHOR

Joshua Arnold

Joshua Arnold is a senior writer at The Washington Stand.

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