Biden’s $6.9 Trillion Deficit Gamble

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Reducing the deficit does not reduce the debt. You need a negative deficit (surplus) to do that. U.S. debt is projected to grow from $31 trillion to $50 trillion in 2033. Interest on the debt could grow from $500 billion to $3 trillion, which is about 60% of current tax revenue.

Deficits, debt, interest rates and inflation are intertwined and sometimes confused. For example, many believe that our deficit is our Debt. It’s not. In the following, I provide the arithmetic to tie these four economic factors together.

President Biden has proposed a $6.9 trillion budget that calls for reducing deficits and raising taxes on wealthy people and large corporations. There is a lot of spending in this budget that fuels inflation. The planned $1 trillion reduction in the deficit does not reduce the debt. The Congressional Budget Office projects the U.S. debt to grow from $31 trillion today to $50 trillion in 10 years.

Debt is accumulated deficits

Here’s the arithmetic: Debt = ∑ Deficits = $31 trillion currently

President Biden proudly brags about his accomplishment of reducing the federal deficit by more than $1 trillion. Reducing the deficit is indeed praiseworthy. What exactly did President Biden do?