Requirements for Eliminating the Trade Deficit

If the United States is to eliminate its external deficit, it must satisfy certain basic economic conditions with respect to its private savings, private investment, and total government budget deficit. The U.S. current-account deficitreached a record $140.6 billion in 1986and probably will not improve, on balance,this year. A slight worsening earlyin 1987 could offset a modest improvementlate in the year. Consequently, theUnited States will continue to amassexternal debts and will become one ofthe world’s largest debtor countries.