Rising US deficit a worry, but Warren Buffett puts stock in 'American tailwind'

In the latest annual letter to shareholders, Warren Buffett cautioned that "huge and entrenched fiscal deficits", the kind run by the American government, "have consequences." However, in the same breath, Buffett pointed out that near-term economic and market forecasts are "worse than useless".

Warren Buffett, the billionaire investor and a market guru, has been affectionately given the moniker of 'The Oracle of Omaha'.

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"Though economists, politicians and many of the public have opinions about the consequences of that huge imbalance, Charlie and I plead ignorance and firmly believe that near-term economic and market forecasts are worse than useless," he said.

"Our job is to manage Berkshire’s operations and finances in a manner that will achieve an acceptable result over time and that will preserve the company’s unmatched staying power when financial panics or severe worldwide recessions occur. Berkshire also offers some modest protection from runaway inflation, but this attribute is far from perfect," the investor icon said in his newsletter.

Giving an inkling of the deficits run by the USA, the letter states that during the decade ending in 2021, the United States Treasury received about $32.3 trillion in taxes while it spent $43.9 trillion.

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The $32 trillion of tax revenue, the letter said, was garnered by the Treasury through individual income taxes (48 percent), social security and related receipts (34.5 percent), corporate income tax payments (8.5 percent), and a wide variety of lesser levies.

The newsletter points out the stellar contribution Berkshire Hathaway has made to the US treasury. It states that Berkshire’s contribution via the corporate income tax was $32 billion during the decade, "almost exactly a tenth of 1 percent of all money that the Treasury collected."

The letter lets us in on the outsized contribution that the company is making to the US treasury via its tax payments. The letter marks out, "Had there been roughly 1,000 taxpayers in the US matching Berkshire’s payments, no other businesses nor any of the country’s 131 million
households would have needed to pay any taxes to the federal government. Not a dime."

Evidently, neither Buffett nor the company is begrudging the quantum of tax payments. Further, the veteran investor puts his stock in America and its dynamism and chalks out that he is yet to see a time when making a long-term bet against America made sense.

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"At Berkshire, we hope and expect to pay much more in taxes during the next decade. We owe the country no less: America’s dynamism has made a huge contribution to whatever success Berkshire has achieved – a contribution Berkshire will always need. We count on the American
tailwind and, though it has been becalmed from time to time, its propelling force has always returned." the letter states.

It goes on to add, "I have been investing for 80 years – more than one-third of our country’s lifetime. Despite our citizens’ penchant – almost enthusiasm – for self-criticism and self-doubt, I have yet to see a time when it made sense to make a long-term bet against America. And I doubt very much that any reader of this letter will have a different experience in the future."