Living beyond our means

Abstract: Both the current account deficit and the federal fiscal deficit are symptoms of living beyond our means. In this essay, we first provide the basic conceptual background, starting with some elements of national income accounting. We show how the two deficits are related to each other, and how they may be affected by public policy and private actions that impact economic behavior. We then cover the facts about the two deficits--their magnitude and their recent history. Next comes the question of sustainability and the long term consequences of the deficits. We conclude with an overview of the current situation and the dilemma faced by policy makers.

Keywords: Budget deficits; Federal Reserve Bank of Boston;

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Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: Annual Report

Publication Date: 2004

Pages: 6-25