American Economic Association

That’s because in most of those years federal budget deficits were larger than net lending in the rest of the economy. Moreover, despite this large net debt, the income the United States receives from its holdings of foreign assets has exceeded the income it pays to foreign holders of U. S. Since the financial crisis, worldwide demand for safe financial assets, especially U. S. Treasury securities, has kept U. S. international borrowing costs particularly low relative to the income the United States earns on its investment abroad. The United States has been a net borrower for much of the past four decades, with borrowing peaking at 5. 8 percent of GDP in 2006. U. S. net borrowing and its complement, the current account deficit, then shrank with the collapse of trade and capital flows worldwide in the financial crisis and Great Recession and, while still large, have remained roughly the same share of GDP since 2009.


Dollars flow out when the United States lends to the rest of the world by buying foreign financial assets or when U. S. companies invest abroad. President Trump’s view of trade as a situation in which one country can only gain at the expense of other countries is at odds with the vast majority of economists’ broadly accepted understanding that trade makes each trading partner richer than it would be on its own.

Economists find that trade wars, in which countries impose tariffs or other restrictions on imports from one another and/or subsidize their own exports, shrink those opportunities and make countries that engage in them worse off than they would be with more open trade. Employers can afford to pay workers more without threatening their bottom line when their workers produce more per hour worked and when businesses can charge higher prices for the goods and services they sell.

Of those who state they personally lost the job, half say these people are still unemployed, the third have returned in order to their old job plus 15% are in the different job than prior to. Lower-income adults who have been set off due to the particular coronavirus are much less likely in order to be working now than middle- and upper-income adults who lost their jobs (43% vs. 58%). Adults ages 18 to 29 are less likely than those 30 to 64 to have returned to their previous job. The 2001 recession and deficit-producing tax cuts in 2001 and 2003 ended the brief era of federal budget surpluses. The federal government became a major borrower again, but businesses and households also went on a borrowing binge in the housing boom preceding the Great Recession. That combination led to record net national borrowing that reached 5. 8 percent of GDP in 2006. The United States has been a net international borrower every year but one since 1983.

The United States’ balance of payments with the rest of the world, however, includes not only the income flows recorded in the current account but also capital flows associated with borrowing, lending, and investment by the United States and its trading partners. Dollars flow in when the rest of the world lends to the United States by buying U. S. Treasury securities and other U. S. financial assets or invests directly in the United States by acquiring, establishing, or expanding businesses here.