Reducing The U.S. Deficit | Seeking Alpha

Today 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. So, 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 hear 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 above $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, as shown in the following:

Conclusion

The US 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, much of which is slated to be paid by our grandkids kid’s kids. Also off-balance-sheet debt for Social Security and Medicare is estimated to exceed $75 trillion.

Kicking the can down the road defers the pain and intensifies it in the future. Playing word games with “deficit” is just plain annoying.

Congress needs to deal with the problem this time.