If you pump money into an economy, which the tax cut has done, people are going to spend some of the loot on imports. From Tom Luongo at tomluongo.me:
Sometimes math is a real bitch. Donald Trump is a smart guy. I know he knows math.
Too bad he’s ignoring it.
Here’s the gig. The title says it all. Government spending is rising rapidly. More actual money is flowing into the US economy. Where is that spending going? To buy cell phones, computers, cars, office supplies and all the rest.
It doesn’t matter if the purchase is made at Best Buy through a Purchase Order, the money still goes to stuff built and imported from China. The second order effect is that even if it goes to subsidize a farmer in Iowa or a defense contractor in California, that money winds up in the hands of a consumer who does what?
Goes to Best Buy and buys a new TV. This isn’t rocket science folks, it is simple cause and effect.
More money chases those goods. Despite the naysayers, Apple is selling a crap-ton of $1200 phones…. built where? China.
So, the budget deficit thanks to record spending is fueling the very trade deficit with China that Trump is complaining about daily.
Here’s the math.
Big Badda Boom
First up is the budget deficit numbers through nine months of fiscal year 2018, courtesy of Zerohedge.
This resulted in a June budget deficit of $75 billion, better than the consensus estimate of $98BN, and an improvement from the $147 billion deficit in May and as well as slightly less than the deficit of $90.2 billion recorded in June of 2017.This was the second biggest June budget deficit since the financial crisis…
…The June deficit brought the cumulative 2018F budget deficit to over $607BN during the first nine month of the fiscal year, up 16% over the past year; as a reminder the deficit is expect to increase further amid the tax and spending measures, and rise above $1 trillion.
The post has a ton of charts to illustrate the point, but it’s mostly unnecessary. The US Treasury is issuing debt at an astounding rate to cover this budget. Spending goes up as tax receipts do thanks to lower tax rates and increasing growth.
To continue reading: Record Deficits, Stronger Dollar Equals Record China Trade Deficit