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.
This report is part of the RAND Corporation paper series. The paper was a product of the RAND Corporation from 1948 to 2003 that captured speeches, memorials, and derivative research, usually prepared on authors' own time and meant to be the scholarly or scientific contribution of individual authors to their professional fields. Papers were less formal than reports and did not require rigorous peer review.
Permission is given to duplicate this electronic document for personal use only, as long as it is unaltered and complete. Copies may not be duplicated for commercial purposes. Unauthorized posting of RAND PDFs to a non-RAND Web site is prohibited. RAND PDFs are protected under copyright law. For information on reprint and linking permissions, please visit the RAND Permissions page.
The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.