A version of this newsletter was originally published on lynalden.com.
This newsletter issue analyzes three common misconceptions about the US federal debt and deficits.
The ongoing nature of the deficits has several investment implications, but along the way it’s important to not get distracted by things that don’t add up.
Fiscal Debt and Deficits 101
Before I jump into the misconceptions, it’s useful to quickly remind what the debt and deficits are, specifically.
-In most years, the US federal government spends more than it receives in tax revenue. That difference is the annual deficit. We can see the deficit over time here, both in nominal terms and as a percentage of GDP:
-As the US federal government runs deficits over years and decades, they add up to the total outstanding debt. That’s the stock of debt that the US federal government owes to lenders, which they pay interest on. When some of…
