Can the growth in the U.S. current account deficit be sustained? How does the flow of deficits feed the stock of debt? And how will the burden of servicing this debt affect future deficits and economic growth? These are some of the questions we address in this Strategic Analysis....

Rising home prices and low interest rates have fueled the recent surge in mortgage borrowing and enabled consumers to spend at high rates relative to their income. Low interest rates have counterbalanced the growth in debt and acted to dampen the growth in household debt-service burdens. As past...

As we projected in a previous strategic analysis, the U.S. economy experienced growth rates higher than 4 percent in 2004. The question we want to raise in this strategic analysis is whether these rates will persist or come back down. We believe that several signs point in the latter direction....

The main arguments in this paper can be simply stated: 1) If output in the US grows fast enough to keep unemployment constant between now and 2010 and if there is no further depreciation in the dollar, the deficit in the balance of trade is likely to get worse, perhaps reaching 7.5 per cent by...

The US economy has grown reasonably fast since the second half of 2003 and the general expectation seems to be that satisfactory growth will continue more or less indefinitely. This paper argues that the expansion may, indeed, continue through 2004 and for some time beyond. But with the...

Wynne Godley, our Levy Institute colleague, has warned since 1999 that the falling personal saving and rising borrowing trends that had powered the US economic expansion were not sustainable. He also warned that when these trends were reversed, as has happened in other countries, the expansion...

Right through the boom years prior to 2001, the U.S. economy faced a strategic predicament in that the main engine of growth (credit financed private spending) was unsustainable, from which it followed that the whole stance of U.S. fiscal policy would have to be radically changed if the New...

These are fast moving times. Two years ago, the U.S. Congressional Budget Office (CBO, 2001) projected a federal budget surplus of $172 billion for fiscal year 2003. One year ago, the projected figure had changed to a deficit of $145 billion (CBO 2002). The actual figure, near the end of fiscal...

The long economic expansion was fueled by an unprecedented rise in private expenditure relative to income, financed by a growing flow of net credit to the private. On the surface, it seemed that the growing burden of the household sector's debt was counterbalanced by a spectacular rise in the...

Notwithstanding the great achievements of the U.S. economy, the growth of aggregate demand during the past several years has been structured in a way that would eventually prove unsustainable. During the main period of economic expansion, the fiscal stance tightened at a much greater pace than...