The case for closing the deficit
The current accounts deficit—the broadest measure of all goods, services and income transactions—reached a high of 6.1% of GDP in 2006, totaling $803 billion. In 2007, the deficit fell slightly, but it was nowhere near the surplus enjoyed in the postwar period, nor was it comparable to the previous three decades (Figure A). In fact, the deficit in 2007 was more than double the average deficit between business cycle peaks in 1979 and 2000 (5.3% vs. 2.0%).
While the U.S. had a $104 billion surplus on trade in services, income, and transfer payments in 2007, it also ran a goods trade deficit of $831 billion that equaled 114% of the overall U.S. current account deficit. The goods trade deficit is simply too large to be offset by net services trade and income flows in the foreseeable future.