This paper is the text of a statement presented before the Budget Committee of the U.S. Senate, February 22, 1989. The author considers the economic effects of the U.S. trade and budget deficits, and cautions that concern about them may obscure a more important issue, the declining savings rate. He concludes that neither deficit is alarming. The federal budget and the trade accounts are less significant indicators of the economy's health than are the maintenance of sustained real economic growth, high employment, and low inflation.
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