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Trump’s tariffs will slow national debt growth, but not pay it down say experts

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President Trump has a two-pronged plan for the proceeds of his tariff regime. Firstly, he says, it’s going to pay down America’s $37 trillion national debt. Secondly, he’s considering sharing the spoils with the public.

“The purpose of what I’m doing is primarily to pay down debt, which will happen in very large quantity,” Trump told media earlier this month. “But I think there’s also a possibility that we’re taking in so much money that we may very well make a dividend to the people of America.”

The plan sounds welcome, in theory. But there’s just one problem. At present, tariff revenues don’t even cover the interest on the debt—let alone reduce its overall size.

According to Treasury data seen by Fortune, the accrued interest expense on Treasury notes in July alone was $38.1 billion. Add to that $13.9 billion in interest on Treasury bonds, $2.85 billion on Treasury Floating Rate Notes (FRN) and a total of $6.1 billion across Treasury Inflation-Protected Securities (TIPS) assets. The bill is eye-watering: The total comes to $60.95 billion for the month.

By contrast, Treasury statements show that tariffs only brought in $29.6 billion to offset it. An impressive figure, but still not enough to rival interest payments.

Of course, the White House could pay off some of its debt and reduce interest payments by deploying the tariff revenues directly to the bottom line. Governments have a number of ways to pay off debt, either by paying off bonds at maturity instead of rolling them over, or launching a buyback scheme in order to retire the bonds and reduce total outstanding debt.

It seems that the White House is not yet enacting a plan for the latter option. A tentative schedule of buyback operations for August 2025 shows the Treasury intends to spend nearly $40 billion buying back various security types and maturity ranges. However, compared to a similar schedule from August last year, this is $10 billion less than the Biden administration had accounted for.

Looking forward, if the Trump team does intend to pass through circa $30 billion a month toward offsetting the national debt, it would have accrued a gargantuan $360 billion payment over a year. This figure is less than 1% of America’s national debt, at the time of writing.

Of course, those on the bullish end of the economic scale are unconcerned by the notion of paying off national debt because a) the bond market forms a core part of the economy, b) the U.S. could grow its way out of any default or debt crisis, and c) the nation is in control of its own fate because its central bank has the ability to ease the cost of borrowing.

Nonetheless, warnings are coming from some of the most significant corners of the economy. In the private sector, JPMorgan Chase’s CEO Jamie Dimon believes America is barreling towards a predictable crisis; in the public sector, Fed chairman Jerome Powell believes it’s time to have an “adult conversation” about debt.

And the president himself is clearly aware of the issue, pushing efficiency and cost-cutting to bring down deficits. The only problem is, economists can’t quite figure out his maths.

The White House told Fortune: “America’s debt-to-GDP ratio has actually declined since President Trump took office – and as the administration’s pro-growth policies of tax cuts, rapid deregulation, more efficient government spending, and historic trade deals continue taking effect and America’s economic resurgence accelerates, that ratio will continue trending in the right direction.

“That’s on top of the record revenue that President Trump’s tariff policies are bringing in for the federal government, and cooled inflation paving the way for interest rate cuts.”

Offsetting, not repaying

By Professor Joao Gomes’s calculations, President Trump’s tariff regime is netting his expenditure at zero as opposed to improving the balance sheet.

The Wharton professor of finance and economics (at President Trump’s alma mater, the University of Pennsylvania) believes the tariff income will offset the costs of the Oval Office’s “One Big, Beautiful Bill Act”—estimated by the Congressional Budget Office to add $3 trillion to the debt by 2030—and not go much further.

“They leave the national debt picture similar,” Professor Gomes tells Fortune in an exclusive interview. “The idea that [tariffs are] going to pay down the national debt is of course greatly overstating it.”

That being said, Professor Gomes said tariffs are likely to have some useful dragging effects on the speed at which America’s national debt is accumulating. The White House said it expects its bill to reduce the much-watched debt-to-GDP ratio to 94% from its current standing of 121% by increasing economic growth.

“There’s no question of us paying down the debt,” Professor Gomes added. “Every year the government needs $1.8 trillion of net new borrowing, so that number could go down, but before we have any questions about repaying we first need to close that gap—and 1.8 trillion is impossible to close … the best we could hope for is if the tariffs turn out to generate enormous amounts of revenue [and] reduce that annual budget gap, which would make the debt grow less quickly.” 

“The idea that somehow in the debt is gonna go down, we’re gonna start buying things back and so on and reduce the debt in dollar terms is just unimaginable. We’ll never get that much revenue.”

Professor Gomes was echoed by Dr Desmond Lachman, a senior fellow at the American Enterprise Institute. He told Fortune in an exclusive interview: “[For Trump] to say that he’s going to raise maybe $300 billion is a drop in the ocean in relation to the amount of red ink they’ve got. The country’s on a really dangerous debt trajectory.”

Signals to markets

How much of a problem national debt proves to be ultimately comes down to foreign investors, and their confidence in the U.S. government’s ability to pay its bills. Approximately 26% of America’s debt is held by foreign countries according to The Conference Board, presenting significant issues if those investors decide to take flight.

Dr Lachman believes that while President Trump may be framing tariffs as bringing back jobs or paying off debt to be more politically palatable, investors will see through the rhetoric. “Markets aren’t dumb. They can do the arithmetic and figure out that this is nonsense,” he said.

The former deputy director for the International Monetary Fund’s (IMF) Policy Development and Review Department added that the continued flight to gold (prices are up 27% over the past year) is indicative that markets no longer view U.S. Treasuries as the ultimate safe haven.

“People are worried that this government’s not serious about economic policy,” Dr Lachman said. “Trump can say what he likes. A comment I think is great is: One thing about the bond markets is that they can’t be primaried. In bond market, the money’s gonna move. People just want to protect their cash, they’re not afraid of being bullied by Trump if the numbers don’t add up.”

Counter to Dr Lachman’s point is the fact Treasury yields have stayed relatively flat over the past couple of years. 10-year is at around 4.3%, and was the same in late-October 2022, while 30-year has hung around the 4.8% mark since 2023.

Due to this, Professor Gomes believes the market isn’t alarmed by the Trump team’s unorthodox methods of balancing the debt. He said: “There’s interesting and peculiar things about this that we’ve all noticed. For example, the news earlier this week that Nvidia is gonna give effectively a 15% tax to the federal government for any exports to China certainly brings an extra source of revenue to the government that is not going to be small.”

“The ability of this president and this administration to find strange ways” to generate revenue may convince markets of Trump 2.0’s sincerity when it comes to the debt, Professor Gomes added, “I’m not sure I would discount that ability to continue to do things that I would not support, and I don’t think [are] great ideas, but at the end of the day, you cannot deny that they bring strange forms of revenue that do change the debt picture.”

And while there are two ends of the spectrum on who will end up paying for the tariffs (at one end Trump, saying it will be foreign nations, at the other end the likes of Goldman Sachs says the majority of the prices will be paid by U.S. consumers), the administration is proving it can “extract revenues.”

“Whatever you think of the methods,” Professor Gomes added, “If it’s an issue they can find ways to do this.”

A turning point?

National debt is often described as a game of chicken played by one administration then the next, adding to the debt and risking crisis instead of introducing potentially unpopular policy to address it (austerity).

Trump’s unusual approach to revenue generation shouldn’t be viewed as an end to that game, said Professor Gomes, but merely a delay of any reckoning. “It seems clear that suspicious as [markets] are of the policies they feel confident that that’s not going to happen at the moment,” the economist said. “We would need something, some other event of some type—a serious war or conflict—the things that really change paradigms” to prompt such a crisis, he added.

The Conference Board is not so convinced. “The debt crisis is here” it said in a note shared with Fortune, outlining a six-step program to reduce the debt-to-GDP ratio to 70% within 20 years. This includes, among a range of ideas, establishing a bipartisan committee for fiscal responsibility, enacting tax reform to increase revenues in a fair way, and develop a package of reform for social security.



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Mike Bloomberg’s new $50 million mayor bootcamp trains local leaders not to ‘play it safe’

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Michael R. Bloomberg has believed mayors have plenty to teach each other since he was mayor of New York City and supported the effort to share good municipal ideas through his nonprofit Bloomberg Philanthropies since he left office in 2013.

However, as more nations get bogged down in what the media entrepreneur and philanthropist calls “ideological battles and finger-pointing,” Bloomberg says mayors can do even more. He is expanding his support for them internationally, with the Bloomberg LSE European City Leadership Initiative, a collaboration with the London School of Economics and Political Science and the Hertie School in Berlin. And other philanthropists are investing in building stronger municipal governments to strengthen urban communities.

“Mayors are more important than ever because cities are more important than ever,” Bloomberg told The Associated Press in a statement. “For the first time in the history of the world, a growing majority of the world’s people live in cities – and cities lie at the heart of many of the biggest challenges facing countries, including expanding economic opportunity.”

The new international initiative, established by a $50 million investment from Bloomberg Philanthropies, brings together 30 mayors and 60 senior officials from 17 countries, representing over 21 million residents.

After one meeting in October, some already see the potential.

Oliver Coppard, mayor of South Yorkshire, England, jumped at the chance to work with Bloomberg Philanthropies again. Coppard learned much at the Bloomberg Harvard City Leadership Initiative, which focuses on training American mayors, but offers 25% of its seats to international mayors. And even he was surprised by how much he had in common with the first international class of mayors. They all look for ways to get their organizations to move faster, deal with social media, and communicate better with their communities.

“It was actually really surprising,” Coppard said. “There are a bunch of areas where, we all felt, despite the very different context that we work in, we were facing very similar challenges.”

A ‘show me, not trust me’ moment for mayors

Despite the varying political ideologies and viewpoints from a wide range of countries, Coppard said what united the mayors was a desire to serve their communities better through health care, transportation, and communication.

It’s exactly what James Anderson, head of Government Innovation programs at Bloomberg Philanthropies, hoped they would find. But he says tackling those issues has broader implications that require more philanthropic involvement.

“All of these mayors are recognizing that local governments have become the bulwark for democratic legitimacy,” Anderson said. “They feel the burden of that. And they want new and better ways to rebuild trust and a sense amongst their citizenry that government — local government, in particular — sees them and can respond to their needs in impactful ways.”

Anderson said the mayors also understand they have to show how government works for its community. Public safety, trash pickup and snow plowing have taken on new significance.

“We are in a moment where trust in institutions is very low,” he said. “This is a ‘Show me, not trust me’ moment. And mayors recognize that means they need to govern differently.”

Joseph Deitch, founder of the Elevate Prize Foundation, believes that philanthropy also has to support mayors and their cities differently.

“These days, there’s so much polarization,” he said. “Everyone is defending their corner. So where can we have common ground? I think one of those places is love of our cities.”

Launching Elevate Cities in Miami

To cultivate a stronger bond to those places, Deitch has launched Elevate Cities, a new initiative that both celebrates what makes cities special and convenes community leaders to make them better. The initiative will start in Deitch’s current home with Elevate Miami, though he hopes to expand it quickly to other cities.

In November, Elevate Miami awarded $25,000 unrestricted grants to three different Miami nonprofits to increase their impact on the city. Later this month, there will be a citywide scavenger hunt to introduce Miami residents to nonprofits in the area. And in January, Elevate Miami will launch a contest to write a love song to the city.

Kim Coupounas, Elevate Cities CEO, says that getting people to recognize all the positive things happening around them in their city makes it easier to cultivate civic pride. It also makes it easier for municipal leaders to get support from the community.

“We’re really trying to engage all of the city,” she said. “There’s so much potential and possibility that can come to life because we join hands and recognize what a good place we live in and what more can happen here.”

Bloomberg said he hopes the new Bloomberg LSE European City Leadership Initiative and other programs supporting municipal leaders will help spread good ideas and the diversity of viewpoints needed to try new strategies for their cities.

“If mayors want to do big things, they can’t afford to play it safe,” he said.

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Associated Press coverage of philanthropy and nonprofits receives support through the AP’s collaboration with The Conversation US, with funding from Lilly Endowment Inc. The AP is solely responsible for this content. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.



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‘It absolutely matters politically’: Swing-district Republicans alarmed at spiking health insurance premiums tipping midterms

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Republicans in key battleground U.S. House districts are working to contain the political fallout that may come when thousands of their constituents face higher bills for health insurance coverage obtained through the Affordable Care Act.

For a critical sliver of the Republican majority, the impending expiration of what are called enhanced premium tax credits after Dec. 31 is a pressing concern as they potentially face headwinds in a 2026 midterm election that will be critical to President Donald Trump’s agenda.

One of those is first-term U.S. Rep. Ryan Mackenzie, R-Pa., whose victory for the Allentown-area seat last year was among the narrowest in the nation.

Mackenzie is part of a bipartisan group that has been pressing for an eleventh-hour compromise, advocating for an extension of the tax credits that tries to fix perceived flaws and bring down health care costs. But the push is a long shot due to entrenched GOP opposition to the health overhaul known as “Obamacare.”

“I think that we need to deal with the reality of where we are now and even if you have a broken system, that doesn’t mean that you shouldn’t provide or offer relief to individuals who are dealing with those high costs right now,” Mackenzie said in an interview with The Associated Press.

Democrats have been laying the groundwork, starting with this fall’s shutdown fight, to make the health care issue a focus of next year’s campaigns.

The party’s strategy for capturing the House majority centers on pinning higher bills for groceries, health insurance and utilities on the policies of Trump and Republicans.

Republicans torn over an extension

In Washington, Republicans from competitive House districts have authored or signed onto bills that would temporarily extend the tax credits. A new bipartisan proposal unveiled Thursday has drawn support from roughly 15 Republicans and 20 Democrats so far.

“I have 40,000 people in my district who rely on this health care and doing nothing to prevent a spike in their premiums is wrong,” said U.S. Rep. Jen Kiggans, R-Va., a sponsor of the plan.

Thirteen Republicans — including Mackenzie — signed a letter in late October to the House speaker, Rep. Mike Johnson, R-La., encouraging the temporary extension of the tax credits, saying letting them “lapse without a clear path forward would risk real harm to those we represent.”

Johnson hasn’t committed to a short-term extension vote before Jan. 1 and has dismissed the looming premium increases as affecting a small percentage of Americans.

More than 24 million people have ACA health insurance, including farmers, business owners and other self-employed people who don’t have other health insurance options through their work.

Many benefit from subsidies that lower their out-of-pocket cost. Those subsidies include the enhanced premium tax credits, which were added and then extended under Democratic President Joe Biden when his party was the majority in Congress.

Some Republicans — including Mackenzie — couch their support for an extension with the caveat that changes must be made. One is rooting out insurance broker fraud. Another is backing off subsidies for higher earners.

Time is running out

U.S. Rep. Kevin Kiley, one of the California Republicans whose districts have been redrawn to favor a Democrat, sponsored a bill to extend the tax credits for two years. His bill would also impose an income eligibility cap to exclude higher earners.

Kiley said the current system isn’t working, but there’s not enough time to make systematic reforms before millions of Americans “just suddenly pay double on their premiums.”

U.S. Rep. Jeff Van Drew, R-N.J., also has a bill to temporarily extend the credit, and said letting the subsidy lapse will make it harder for Republicans to retain the majority next year.

“People say, ‘well, it’s not that many people,’” Van Drew said. “The kind of election we’re going to have in the midterms in multiple districts is going to be decided by one or two points. It’s going to be close. It’s going to be tight, and it does matter. It absolutely matters politically.”

U.S. Rep. Richard Hudson of North Carolina, chair of the House Republicans’ campaign arm, said the tax credits won’t be “decisive” in next year’s election when other things are likely to be on voters’ minds.

Democrats will run on affordability

But U.S. Rep. Suzan DelBene of Washington state, who chairs the House Democrats’ campaign arm, said swing-district Republicans won’t be able to distance themselves from the expiration of the tax credits.

“The number one issue across the country is affordability and health care is a key part of that,” DelBene said.

The Congressional Budget Office projects that 3.8 million more people will be uninsured in 2035 if the tax credits aren’t extended. But the tax credits also come with a cost: Extending them would increase the deficit by $350 billion over the next decade.

The expiration of the tax credits means enrollees will see annual premiums more than double — from an average of $888 in 2025 to $1,904 in 2026, according to health care research nonprofit KFF. That’s an increase of 114%.

The size of the increases varies by state, age and income and will be more extreme in Mackenzie’s district, according to state data, which puts the average premium increase at 178%.

A primary field of Democrats is shaping up for the nomination to challenge Mackenzie. They say they’re hearing from people who are struggling to afford rising premiums.

One of those Democrats, Ryan Crosswell, said rising insurance costs are a “breaking of promises” by Trump, Republicans and Mackenzie. Another Democrat, Carol Obando-Derstine, called the impending expiration a “crisis of (Mackenzie’s) own making.”

Mackenzie says he’s made it clear repeatedly that he supports an extension, but that “I am not the speaker, I don’t set the calendar or the agenda. I’m not the leader, I can’t call up bills.”

Enrollees facing hard choices

In Mackenzie’s district, more than 20,000 people received the enhanced tax credits in 2025, according to state data. He won his race last year by 1 percentage point, or about 4,000 votes.

One of those 20,000 people in Mackenzie’s district is Patrick Visconti, who switched to a low-premium, high-deductible plan because he couldn’t afford to keep his plan with a premium that is more than doubling from under $200 to over $500 a month.

Visconti, 59, who works as a self-employed landscaper and a bus driver, said the plan he picked is “crappy coverage.”

“I’d rather pay the $200 a month. But I can’t get anything for $200,” Visconti said.

Lynn Weidner, a home care worker in Mackenzie’s district who works nearly 80 hours a week, said her $400 premium will increase to $680. But, she said, she’s leaning toward selecting the plan because she has various conditions — including an iron deficiency — that require regular medical care.

“So I’m trying to find places where I can cut money so that I can afford my insurance come January, which is stressful,” Weidner said.



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‘Everybody wants the economy of tomorrow, but paying the bills today is absolutely critical’: Democratic governors huddle on affordability

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Democratic governors met this weekend in Arizona, looking to parlay last month’s big victories for the party in New Jersey and Virginia into campaigns for next year’s midterms, when a majority of governor’s seats will be up for election.

Those elections helped Democrats zero in on what they see as a strategy to help grow their ranks in office and recover from big losses in 2024, when voters put Donald Trump back in the White House and gave Republicans majorities in both houses of Congress.

The plan is to focus intently on making life more affordable, a message they hope will work even in some conservative-leaning states.

“We have to be laser focused on people’s everyday concerns and how hard life is right now for the American people,” said Kentucky Gov. Andy Beshear, the new chairman of the Democratic Governors Association and a possible candidate for president in 2028. “Everybody wants the economy of tomorrow, but paying the bills today is absolutely critical.”

He and other governors said Democrats can use the affordability message as a cudgel against Trump without making him the central focus of their campaigns.

“Yes, we can judge a president, and we should judge this president,” Beshear said. “But we never judge those voters.”

Democrats hone in on costs

The meeting of Democratic governors comes as blue states have been under fire from the Trump administration, which is exercising power in novel ways against the president’s perceived enemies.

Trump has deployed the National Guard in California, Oregon and Illinois over the objections of their Democratic governors. His administration has demanded detailed voter data and threatened to cut off food assistance for states that don’t provide information to support his immigration crackdown.

Heading into a primary season in which factions will battle over the future of the party, Democratic governors largely sang from the same sheet over the weekend. A dozen candidates and sitting governors all said they plan to talk extensively about the costs of housing, child care, utilities and groceries during Trump’s second term.

But the unified focus on affordability papers over real divisions in the party’s ranks over how aggressively to confront Trump, who won all of the presidential battleground states last year, and how to deal with the rising costs that are squeezing Americans.

On the same day Democratic moderates with national security credentials, Mikie Sherrill in New Jersey and Abigail Spanberger in Virginia, won their governor’s races, Democratic socialist Zohran Mamdani won election as New York mayor. All ran on promises to tackle affordability, but they offered very different visions for how to deliver.

The affordability strategy isn’t without risk. Economic conditions could change, making concerns about prices less salient or urgent.

And Democrats could be setting themselves up for disappointment down the road if they win in 2026 but are unable to bring down costs to voters’ satisfaction, allowing Republicans to capitalize on the same buyer’s remorse Democrats are now seeking to stoke.

For Democratic incumbents seeking reelection, they can’t rest on fighting the Trump administration, said two-term Democratic Gov. Michelle Lujan Grisham of New Mexico. They need to show results.

“Deliver for me. But don’t forget to fight this,” said Lujan Grisham, who is barred by term limits from seeking reelection. “They do want both, and finding ways to cross-cut those and marry that I think is going to be a winning set of messages.”

Affordability also becomes a focal point for Trump

After the New Jersey and Virginia elections last month, the White House began shifting its message to focus more on affordability. Trump, who has not done much domestic travel during his second term, is scheduled to visit Pennsylvania on Tuesday to highlight his efforts to reduce inflation.

The president has talked more about affordability recently, and he reduced tariffs on beef and other commodities that consumers say cost too much. But Trump also has said the economy is better and consumer prices lower than reported by the media.

“The word affordability is a Democrat scam,” he said during a Cabinet meeting last week.

He continues to blame his Democratic predecessor, former President Joe Biden, for the increase nationwide in inflation rates that occurred this year after his return to the White House. Overall, inflation is tracking at 3% annually, up from 2.3% in April when Trump rolled out a sweeping set of import taxes.

Treasury Secretary Scott Bessent on Sunday said the administration will be intent on reducing inflation, after tackling immigration and pushing to have interest rates cut.

“I expect inflation to roll down strongly next year,” he said on CBS’s “Face the Nation.”

Democratic governors and candidates were largely aligned in the conclusion that many voters in 2024 didn’t feel as if their party was focused on their concerns or shared their anger at a system they believe is failing average Americans.

“I think if there was any failure in the presidential election, it’s we forgot what real people care about,” said Oregon Gov. Tina Kotek, who is expected to seek a second term next year.

“We’ve got to listen to people,” said Keisha Lance Bottoms, the former mayor of Atlanta who is running for Georgia governor.

Democrats believe some red states could be in play

Once Spanberger takes office in January, Democrats will control 24 governor’s offices, a significant improvement from the low point of just 16 following the 2016 election but still slightly behind the Republicans’ 26 seats.

Thirty-six states will hold elections for governor next year.

Among the hardest-fought contests will be in swing states that flipped between supporting Biden in 2020 and Trump in 2024. Those include Arizona, where Democratic Gov. Katie Hobbs is seeking a second term, and Nevada, where Republican Gov. Joe Lombardo is up for reelection. Wisconsin, Michigan and Georgia all have open seats that are widely expected to attract a large field of candidates and big spending.

The retirement of Democratic Gov. Laura Kelly in Kansas, an overwhelmingly Republican state in presidential contests, gives the GOP the upper hand there. But Democrats are talking about expanding the field by competing in states such as Iowa or Ohio, where the party used to be competitive but has struggled in the Trump era.

Gina Hinojosa, a Texas lawmaker running for governor in the nation’s second-most populous state, is making the case to Democratic donors that investing in Texas will be crucial to her party’s hopes of winning power in Washington before the 2030 census. Her state is projected to pick up at least four House seats and Electoral College votes at the expense of blue states such as California and Illinois.

“If we don’t flip before the end of the decade, there won’t be Democratic control of Congress or the White House,” Hinojosa said. “Because the math doesn’t work.”



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