EPRS Admin By / October 27, 2017

United States_ current account

The current account (net flows within the external sector – from trade, capital flows, and direct foreign investment) shows a…

United States_ current account

The current account (net flows within the external sector – from trade, capital flows, and direct foreign investment) shows a continuous outflow of money from the USA.
To cover for this trade deficit, the USA must reduce its international asset position (US assets abroad), or increase its international liability position (US liabilities abroad), or both. Interestingly, the US Congressional Budget Office (CBO) released a report in 2013 stating that: ‘But those spending increases will be more than offset by increases in tax receipts, due to two factors. The total population will rise, meaning more workers and more taxpayers. And immigrants will be more likely to be working on the books and paying the taxes they owe. All told, that means an extra US$2 trillion in tax receipts over the following decade. Once you net US$1.1 trillion in added spending, that should reduce deficits by US$900 billion, or 0.2 % of GDP over the next 20 years — not a fiscal sea change, but not trivial either.


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