COMMENT & ANALYSIS Better than expected. That is the headline being given to the progress of the US economy. Last year the deficit was a humiliating 3.6 per cent of gross domestic product. The deficit this year, new numbers suggest, will be 2.7 per cent of GDP – acceptable. The difference? Extra revenues. It seems federal revenues for this year will be $85bn (£47bn) higher than anyone was predicting as recently as March. Growth, too, may be stronger than expected, remaining above 3 per cent. Unemployment? Some forecasters now believe it will dive deep into the mid-4 per cent range.
These data are all impressive but perhaps most impressive are the inflows. The extra dollars are far too few to match the challenge of Washington’s long-term obligations – programmes such as Social Security and Medicare. But they just about offset the $6bn a month the US spends in Iraq. We are on our way to having guns and butter, after all.
