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Report
Balancing the federal budget and U.S. international trade deficits
Eliminating the federal budget deficit, even assuming a correspondingly higher national rate, is likely to yield only a modest reduction in the U.S. international trade deficit. Balancing the federal budget will help improve the trade balance through the effects of lower levels of aggregate demand. But it will almost certainly not cause a large switch of U.S. and foreign demand from goods produced abroad to goods produced in the United States. Such a shift of demand toward U.S. goods is necessary to close the trade gap, and will be difficult to accomplish in the face of the trade competition ...
Report
Perspectives on U.S. external deficits
The paper examines the evolution of U.S. external balances since 1980 and considers various explanations for the persistence of external deficits in the late 1980s and the 1990s. It also offers a general assessment of the medium-term prospects for U.S. current account deficits. The review of evidence indicates that the huge increase in U.S. external deficits over 1980-86 was largely driven by an upward shift in Federal fiscal deficits and that lower Federal deficits together with the dollar depreciation played a crucial role in improving external balances during the second half of the 1980s. ...