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The Current Account Deficit and the Budget Deficit: Is $600 Billion Missing?

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Publication Date: February 2004

Publisher(s): Center for Economic and Policy Research

Author(s): Dean Baker

Topic: Banking and finance (International banking and finance)

Keywords: Federal budget; Income tax; Capital gains tax

Type: Report

Coverage: United States

Abstract:

This paper examines the effect of the rising current account deficit on the budget deficit. It notes that as foreigners own more U.S. financial assets, the government forgoes taxes on income from these assets. This fact calls into question the CBO’s budget projections, which don't assume any impact of increased foreign indebtedness on tax receipts.