Broadcast: January 16, 2004
This is Bob Doughty with the VOA Special English Economics Report.
A new report warns that the rising United States budget deficit and trade imbalance threaten world economic security and growth. The International Monetary Fund released the report last week. The Bush administration says tax cuts have helped economic recovery, and deficit cuts are planned.
Charles Collyns was among several I-M-F officials who researched and wrote the report. Mister Collyns notes that the federal financial balance has changed in the last few years. He says the two-thousand budget year had a surplus of two-and-one-half percent of the gross domestic product. That is the total value of goods and services produced in the country. But in fiscal year two-thousand-three the budget had a deficit of almost four percent of the gross domestic product.
Mister Collyns says additional spending gave immediate and much needed support to the American economy. But he says there are long-term problems if large federal deficits continue. The I-M-F team says budget estimates show large deficits for the next ten fiscal years.
The report says these deficits would lead the United States to borrow more money. It says foreign debt could equal forty percent of the economy in a few years. This would be a record level for a large industrial nation.
The I-M-F says growing debt and increased borrowing may force international loan rates to rise. It says this would restrain private investment, especially in the purchase of government bonds. Mister Collyns says this process is already happening. He says it is partly to blame for the fall in the value of the American dollar during the last year.
The I-M-F experts say the result in the end is lower worldwide productivity and earnings growth. The report says the American government must raise taxes and limit spending to avoid this.
Administration officials noted that President Bush has already said he will work to reduce the deficit by half during the next five years.
Mister Bush spoke about the economy in his weekly radio message last Saturday. He said business investment has increased and the unemployment rate is falling. He said American stock market wealth increased in the past year. And he again called on Congress to make his tax cuts for Americans permanent.
This VOA Special English Economics Report was written by Caty Weaver. This is Bob Doughty.