Clearly absent in the presidential campaign and debates has been any sense of urgency about the federal budget deficit. Neither candidate promises to do more than halve it within four years. And in all likelihood, neither's budget plan would do even that. Our current account deficit, which essentially equals the savings we send to foreigners minus the savings foreigners send to us. The Bureau of Economic Analysis reported last month that the current-account deficit surged to $166 billion in the second quarter, or $665 billion on an annual basis. That's 5.7 percent of GDP--an unprecedented rate of borrowing that many economists fear may lead to a crash in the dollar and in financial markets. And with record monthly trade deficits in the headlines, the gap could widen even further next quarter. A large and widening current-account deficit is what happens when a low-savings country runs large and widening budget deficits.
Why this is important?
Because investment is important for long-run economic growth, government budget deficits reduce the economy's growth rate. In other words, they can slow and even halt the steady rise in material living standards that has always nourished the American Dream. This crowding out wouldn't matter as much if American businesses and households were remarkable savers. But the United States has long had the lowest private savings rate of all major industrial nations--and the rate is falling, not rising.
What should be done to limit the deficit?
The first and simple thing we as Americans need to do is actively support candidates who will lead in the country's looming national debt.
Also, We will no longer support the culture of deficit spending and pork-barrel legislation, as we will have to ...