The Great Deficit Scares: The Federal Budget, Trade, and Social Security
American politics often seems to be focused on three deficits, real and potential: the federal budget, the Social Security Trust Fund, and the trade balance. Robert Eisner, past president of the American Economic Association, explains why this is an unhealthy situation as well as a source of much misunderstanding. He argues that simply looking at the raw numbers creates misimpressions about the country's real economic situation, as well as provoking potentially damaging ideas for " remedies." Eisner points out that Social Security Trust Fund deficits can be " fixed" by simple changes in accounting procedures or funding requirements. And America's trade deficit will not bankrupt the country--servicing America's foreign obligations will take only a tiny share of its national wealth. As with any other loan, Eisner reminds us, it is what deficits are spent on that counts: tax cuts or investments in education, research, or the nation's capital stock. Eisner maintains that the economic dragons the American nation should be attempting to slay do not entail mythically measured budget or current account deficits. The real economic troubles that America faces are those of poverty, income inequality, and a failure to invest in human capital and public infrastructure.
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actual deficit Alan Greenspan American amount annual average balance borrowing budget deficits consumer consumption contributions credit the funds current account deficit debt-to-GDP ratio debt/GDP ratio dependency ratio dollar domestic Economic Perspectives 11 economists elderly exchange rate exports federal budget federal debt held Federal Reserve Figure finance financial wealth fiscal foreign claims foreign investment full employment future higher imports income per capita increase indicate inflation tax inflation-adjusted interest payments interest rates intermediate projections international investment position Japanese lower interest rates Martin Feldstein measured ment NAIRU National Saving Natural Rate nomic OASDI Olivier Blanchard percent less percentage of GDP percentage point production public investment raise rate of growth Rate of Unemployment real deficit reduce retirement Robert Eisner slow the economy Social Security benefits spending surplus or deficit Table trade deficit Treasury securities U.S. assets unem United Wall Street Journal workers
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