Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
Reducing the U.S. deficit is praiseworthy. How was that accomplished in 2022?
Reducing the deficit is not the same as reducing the debt. U.S. debt continues to climb into the stratosphere. At $30 trillion, our debt is more than $95,000 per person. How will it be paid?
In his MLK speech, President Biden reiterated his accomplishment of reducing the federal deficit by more than $1 trillion. Reducing the deficit is indeed praiseworthy. What exactly did President Biden do?
A close look at deficit spending in the 2020s reveals that the deficit increased a lot in 2020 and 2021 due to $5 trillion in COVID spending. Then in 2022 not much was spent on COVID, so the deficit decreased. In other words, the president had little to do with the decrease in the deficit.
The deficit is not the debt
Many interpret the decrease in the deficit as a reduction in the national debt, but that’s far from the truth. Although the deficit declined in 2022, the national debt continued its monumental climb to more than $30 trillion.
In economic terms, the deficit is a “flow” variable, and the national debt is a “stock” variable. The debt is the accumulation of the historical deficits, added to each year by the debt, as shown in the following:
Conclusion
The U.S. is once again confronted with the prospect of raising the debt ceiling, a consequence of not balancing the budget. Our $30+ trillion debt is more than $95,000 per person, slated to be paid by our grandkids kid’s kids. Off-balance-sheet debt for Social Security and Medicare is estimated to exceed $75 trillion.
Indecisiveness and inaction defer and intensifies the pain in we will face. Playing word games with “deficit” is just plain annoying.
Congress needs to deal with the problem this time.
Ron Surz is president of Target Date Solutions, developer of the patented Safe Landing Glide Path and Soteria personalized target date accounts. He is also co-host of the Baby Boomer Investing Show.
His passion is helping his fellow baby boomers at this critical time in their lives when they are relying on their lifetime savings to support a retirement with dignity, so he wrote a book Baby Boomer Investing in the Perilous 2020s and he provides a financial educational curriculum/
Read more articles by Ron Surz
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
