In a recent statement, renowned investor Warren Buffett expressed his belief that the U.S. government is likely to increase taxes rather than reduce spending in order to address the widening fiscal deficits. Speaking at Berkshire Hathaway's annual shareholder meeting in Omaha, Buffett highlighted the potential consequences of maintaining a large fiscal deficit.

Buffett acknowledged that the Congressional Budget Office's latest long-term budget projections estimate federal deficits to rise to 8.5% of gross domestic product in fiscal 2054, up from 5.5% in fiscal 2024. The prospect of renewing the tax cuts introduced in 2017 further deteriorates the expected budget deficits.

When questioned about mounting U.S. government debt levels, Buffett expressed more concern over the fiscal deficit than the size of the Treasuries market, which currently stands at around $27 trillion. As the U.S. dollar remains the world's leading reserve currency, he believed that U.S. debt would remain acceptable for quite some time due to the lack of viable alternatives.

While the focus of the market is primarily on the measures that the Federal Reserve will take to combat inflation, Buffett emphasized that fiscal policies could pose greater challenges. He commended Federal Reserve Chairman Jay Powell as a knowledgeable individual but noted that Powell does not have control over fiscal policy.

Buffett's comments highlight his expectation of increased taxes as a means to address the growing fiscal deficits faced by the United States. With concerns over the sustainability of the current path, Buffett's insights shed light on the potential strategies the U.S. government may adopt in the coming years.