Abstract
The instance in which the gross value of products and services imported from the state is lower than that of the goods and services exported from it is typically referred to as an account deficit (AD). High AD rates imply that the current economic strategy adopted by the state needs a redesign. In the United States, the AD rates have been comparatively high over the past few years, which should be viewed as a reason for concern. To address the problem, one should use all available opportunities to improve the environment in which the U.S. companies operate. By focusing on the issues that affect the economic performance of American companies, such as financial and technological opportunities, infrastructure, etc., one will be able to reduce the AD rates significantly.
Current Account Deficit Rates in the U.S.: Statistics and Reasons
The concept of account deficit (AD) is fairly simple. According to the existing definition, the term “account deficit” is used to describe the situation in which the value of the goods imported into the country is higher than that of the goods exported from it (Hay, 2013). There is no need to stress the fact that the phenomenon of AD is extremely harmful to the state economy because it increases government debt (Coughlin, Pakko, & Poole, 2016). Therefore, the introduction of measures that will help reduce the AD rates is crucial for the contemporary U.S. economy.
At present, the AD rates are rather high in the United States. According to the latest statistical data, the difference between the imported and the exported products reached $119 billion in 2016 (United States current account, 2016). One must admit, though, that the current situation can be viewed as positive compared to the economic environment of 2015 (Coughlin et al., 2016).
The observed phenomenon can be explained by the fact that consumer spending rates are increasing, whereas economic growth can be viewed as steady at best. A large number of capital flows that the United States can attract, however, compensates for the losses that the economy suffers due to the poor AD rate. Furthermore, other aspects of state productivity that affect its competitiveness and the ability to participate in the international trade process successfully, exporting its goods and services, need to be considered as well (Eitemann, Stonehill, & Moffett, 2013). For instance, the specifics of the state infrastructure may need to be revisited and improved so that the processes related to production and trading could be enhanced significantly.
Although the identified system might appear rather distant from the economic domain, it, in fact, has a direct impact on the U.S. economic progress. For example, with a poorly developed infrastructure, especially as far as the transportation issue is concerned, the process of products and raw materials delivery is likely to be hampered (Eitemann et al., 2013). As a result, the quality of services and products will drop immediately, and customers will be left dissatisfied. Thus, it is crucial to pay close attention to the development of the elements that contribute to economic growth.
Expert Opinions: What Professionals Suggest
According to the opinions voiced recently by experts in economics, the investment-related issues can be viewed as the primary source of concern for the United States as far as the account deficit rates are concerned. Coughlin et al. (2016) note that representatives of the Federal Reserve Bank of St. Luis point out that the American economic environment is not considered outstandingly attractive to foreign investors at present. Therefore, there is a need to improve the state’s competitiveness in the global market so that foreign investments could be attracted more easily (Eitemann et al., 2013).
Furthermore, it is remarkable that there are currently two camps of experts as far as the issue of AD is concerned. One group claims that a reduction in the AD levels should be interpreted as a threat to the economic well-being of the state and, therefore, needs to be addressed in a manner as efficient and expeditious as possible. The proponents of the view that an AD drop is dangerous to suggest increasing the state’s competitiveness in the global market by reinforcing the labor productivity and making the state attractive to investors so that the capital flow could be increased. The other group, in its turn, assumes that drops in the AD levels are an integral part of the economic development. Although the identified experts also admit that the low AD levels have a negative effect on the U.S. economy, they presume that the specified changes should be considered important lessons to learn so that similar issues could be avoided in the future (Coughlin et al., 2016).
It appears that both parties of the argument in question have a point. On the one hand, rises and drops in economic growth and, therefore, the changes in the AD rates are part and parcel of the economic cycle (the United States current account, 2016). Nevertheless, people still have to learn important lessons from the negative experiences that they had in a specific time period. Therefore, the problems that the U.S. economy is currently experiencing the need to be analyzed and addressed appropriately so that similar issues could be avoided successfully in the future. As a result, rapid and consistent progress can be expected.
References
Coughlin, C. C., Pakko, M. R., Poole, W. (2016). How dangerous is the U.S. current account deficit?Web.
Eitemann, D. K., Stonehill, A. I., & Moffett, M. H. (2013). Multinational business finance (13th ed.). Upper Saddle River, NJ: Pearson Education, Ltd.
Hay, C. (2013). Treating the symptom not the condition: Crisis definition, deficit reduction and the search for a new British growth model. British Journal of Politics and International Relations, 15(1), 23-27.
United States current account. (2016). Web.