The Current Account Deficit and the Budget Deficit: Is $600 Billion Missing?
Publication Date: February 2004
Publisher(s): Center for Economic and Policy Research
Author(s): Dean Baker
Keywords: Federal budget; Income tax; Capital gains tax
Coverage: United States
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.