America’s Twin Deficits since 1980

The Tax Cuts and Jobs Act of 2017, reduced business and personal taxes with anticipated economic stimulus effects.  However, this Act may worsen the trade deficit by stimulating imports, and the Congressional Budget Office forecasts it will increase the Federal fiscal budget deficit.  This article reviews what is often called “America’s twin deficits” using data from the US National Income and Product Accounts, (see first Data Note and Source).  The review starts with 1980, when President Ronald Reagan’s election launched the US on a fiscal policy path dominated by tax cuts.