1.

4 Sustaianbility of US
Economy
Group No. – 5
Anish
Himanshu
Kinshoo
Neha
Sethu
 Few facts …
  Total economic output, or GDP, is $14.4
trillion. The debt is now 83% of GDP, up
from 51% in 1988.

Nearly two-thirds is the public debt, which is
owed to the people, businesses and foreign
governments who bought Treasury Bills,
Notes & Bonds.




 (Source: U.S. Treasury, Debt to the Penny; 
Current surplus going
negative.
 Causes of US Current Debt
 The large U.S. government deficits attracted foreign
investment to the United States, thus causing the
current account to move into deficit.
 Consumer spending has been rising
 Decline in competitiveness
 Dollar Relatively High compared to current account
deficit.


 The US Trade Deficit and
China
China’s global current account surplus soared to about
$150 billion in 2005, about 7 percent of its GDP.
China has become the second largest surplus country in
the world, slightly behind Japan and far ahead of all
others.
Its foreign exchange reserves have recently passed
Japan’s to become the largest in the world and will
probably reach $1 trillion by the end of 2006.

 Source : www.iie.com
 Think over….
How has global integration affected US
producers and workers, and overall growth
and inflation?
Is a chronic and widening deficit sustainable,
or will the dollar crash, perhaps taking the
economy with it?
If the problem was one of "twin deficits," as
many thought, why has the trade deficit
continued to grow even as the budget
deficit narrowed to zero?
If US companies are so competitive, why does
the trade deficit persist?
What role do international capital markets
 Heading towards
Downfall..
 Administration is suffering “substantial damage”.
 Housing market is trying to help more homeowners
avoid defaulting on their mortgages.
 In a month the economy lost 779,000 jobs in 2009.
 Lower tax revenues (due to falling income) and
increased spending to stimulate the economy and
address financial-sector challenges will significantly
increase the federal deficit and debt levels in the
next few years.
 Serious fiscal challenges posed by the ever-
escalating costs of health care and retirement are a
threat to the nation's economic and national
security interests.

Source : http://www.businessweek.com/news/2010-04-

“If the rest of the world again
finances the US’ large external
deficits, the conditions that
brought on the current crisis will
be replicated.”

- C. Fred Bergsten,
Peterson Instt of International Economics
Few Dangers..!!
 Factors leading to current economic crisis:

Large external deficits
Dominance of Dollars
Huge inflows of foreign capital leading to low
interest rates, excessive liquidity & loose
monitory policy.
Foreign investors might refuse to finance the
US deficits.
Measures to Sustain..

Bridging the gap between the rich & poor.

Limited expenditure over health care.
Different distribution of wealth.
Obama’s Tax Policy can be a useful tool.

THANK YOU ..!!