The Long-Term International Economic Position of the United States looks at the long-run prospects for the international economic position of the United States, with particular focus on the likely evolution of the current account deficit and prospective foreign financing for it.

Its goal is to provide a fundamental framework for the development of US fiscal and other economic policies, especially including responses to the global financial and economic crisis of 2008–09. The central message is that the long-run outlook is extremely worrisome and potentially very costly—in foreign policy/national security as well as economic terms.

As the country (and the world) emerges from the global crisis, and even in fashioning policy responses to the crisis itself, it will be essential to keep the long-run considerations firmly in mind.

This will require early and decisive policy actions, perhaps even in tandem with the near-term stimulus and housing initiatives, to address the ever-escalating costs of the major entitlement programs, Social Security and especially Medicare/Medicaid, and thus the country’s overall fiscal position.

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Special Report 20
Edited by C. Fred Bergsten
ISBN paper 978-0-88132-432-7
May 2009 | 84 pp. | $17.95

Introduction
The Global Crisis and the International Economic Position of the United States

The global financial and economic crisis is likely to change the outlook for the international economic position of the United States in several, perhaps fundamental, ways.

First, it will sharply reduce the current account deficit in the short run. Lower foreign growth will only partly offset the combination of US recession and much lower oil prices. In chapter 2 William R. Cline calculates that the US external imbalance could drop as low as 3.1 percent of GDP ($430 billion) in 2009. This would be its lowest level since 1998. The gains are likely to be short-lived, however, as noted below.

Second, the crisis will sharply increase the budget deficit. Lower tax revenues and increased spending, including for fiscal stimulus and financial rescue operations, will probably raise the US internal imbalance to at least 10 percent of GDP (about $1.4 trillion) for the next couple of years. ...

About the Editor

C. Fred Bergsten has been director of the Peterson Institute for International Economics since its creation in 1981. He was the most widely quoted think tank economist in the world over the eight-year period 1997–2005. He testifies frequently before Congress and appears often on television. Dr. Bergsten was assistant secretary for international affairs of the US Treasury (1977–81); undersecretary for monetary affairs (1980–81), representing the United States on the G-5 Deputies and in preparing G-7 summits; assistant for international economic affairs to Dr. Henry Kissinger at the National Security Council (1969–71); and senior fellow at the Brookings Institution (1972–76), the Carnegie Endowment for International Peace (1981), and the Council on Foreign Relations (1967–68). He was chairman of the Competitiveness Policy Council, which was created by Congress, throughout its existence from 1991 to 1995; and chairman of the APEC Eminent Persons Group throughout its existence from 1993 to 1995.

This is the fortieth book that he has authored, coauthored, or edited. The latest include China's Rise: Challenges and Opportunities (2008), China: The Balance Sheet—What the World Needs to Know Now about the Emerging Superpower (2006), The United States and the World Economy: Foreign Economic Policy for the Next Decade (2005), and The Dilemmas of the Dollar (2d ed., 1996).

Dr. Bergsten has received the Meritorious Honor Award of the Department of State (1965), the Exceptional Service Award of the Treasury Department (1981), and the Legion d'Honneur from the Government of France (1985). He has been named an honorary fellow of the Chinese Academy of Social Sciences (1997). He received MA, MALD, and PhD degrees from the Fletcher School of Law and Diplomacy and a BA magna cum laude and honorary Doctor of Humane Letters from Central Methodist University.

About the Peterson Institute

The Peter G. Peterson Institute for International Economics is a private, nonprofit, nonpartisan research institution devoted to the study of international economic policy. Since 1981 the Institute has provided timely and objective analysis of, and concrete solutions to, a wide range of international economic problems. It is one of the very few economics think tanks that are widely regarded as "nonpartisan" by the press and "neutral" by the US Congress, it is cited by the quality media more than any other such institution, and it was recently selected as Top Think Tank in the World in the first comprehensive survey of over 5,000 such institutions. Support is provided by a wide range of charitable foundations, private corporations, and individual donors, and from earnings on the Institute's publications and capital fund. It celebrated its 25th anniversary in 2006 and adopted its new name at that time, having previously been the Institute for International Economics.

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