Adjustment options for the US economy

Abstract

After some years of staggering expansion, the US economy is faced with large deficits, both in the government budget and on the current account. These deficits make its future rather uncertain, in particular because the likely policy reactions are difficult to predict. One way to reduce this uncertainty is to evaluate different policy options, both with respect to their potential effectivity and with respect to possible side effects. Such an evaluation almost certainly narrows the set of ex ante feasible options. It is worthwhile, therefore, to undertake such an exercise.