Warren Buffett predicted that the federal government would raise taxes to rein in US deficit spending.
“I think there’s a good chance of a tax increase,” the billionaire investor said Saturday at Berkshire Hathaway’s annual shareholder meeting in Omaha.
“They may decide at some point that they don’t want the budget deficit to be this big, because that has some important consequences. So they may not want to reduce spending. , they may decide to take a larger percentage of what we own and we will pay for it,” he said.
In its latest budget projections, the Congressional Budget Office estimates that the federal deficit will rise from 5.5% of gross domestic product (GDP) in fiscal 2024 to 8.5% in fiscal 2054.
If the tax cuts introduced in 2017 continue into next year, the US budget deficit is expected to worsen further.
In its latest long-range budget projections, the Congressional Budget Office estimates the federal deficit will increase from 5.5% of gross domestic product in fiscal year 2024 to 8.5% in fiscal year 2054. The US budget deficit is expected to worsen next year if the tax cuts introduced in 2017 are reimposed.
Asked if he was concerned about the rapidly rising level of U.S. government debt, Buffett said he was more worried about the budget deficit than the size of the U.S. debt market, which currently stands at nearly $27 trillion.
“My best guess is that U.S. Treasuries are going to be accepted for a very long time because there aren’t many alternatives,” he said, noting that the dollar is the world’s main reserve currency. .
Buffett said markets will be focused on the next steps the U.S. central bank takes to fight inflation, but fiscal policy could be more problematic.
“Jay Powell is…a very, very wise man,” he said, referring to Federal Reserve Chairman Jerome Powell.
“But he doesn’t control fiscal policy.”
Last month, the International Monetary Fund criticized the Biden administration’s rampant spending, saying it was “deviating from what is needed for long-term fiscal stability.”
The Washington-based group tasked with combating the global financial crisis warned that rising national debts and budget deficits threaten to worsen inflation and pose long-term risks to the global economy. .
The IMF noted in its forecast that the U.S. federal budget deficit rose from $1.4 trillion in fiscal year 2022 to $1.7 trillion last year.
According to CBO projections, the amount of debt held by Americans is more than $34 trillion, and is expected to rise to $45.7 trillion within 10 years. This is equivalent to approximately 114% of gross domestic product.
“Something will have to give,” the IMF warned.
Since taking office, Biden has spent trillions of dollars not only on infrastructure but also on coronavirus relief efforts. The United States has also spent billions of dollars to help Ukraine fight Russian aggression.
But the Biden administration blamed the ballooning debt on tax cuts signed into law by former President Donald Trump.
“The Trump tax cuts increased the debt by $2 trillion in unpaid contributions disproportionately to the wealthy and big corporations. And now Congressional Republicans are increasing taxes on millions of middle-class households while raising taxes on millions of middle-class households. We’re proposing another $5.5 trillion in tax cuts that are skewed toward demographic groups,” White House press secretary Michael Kikukawa told the Post.
with post wire
