Sun, Jan 23, 2005 - Page 9 News List

The Republicans are celebrating, but economists are nervous


But when he discussed his concerns with Vice President Dick Cheney, according to reports, Cheney quipped: "You know, Paul, Reagan proved deficits don't matter."

John Taylor, a top official in the treasury department, recently sought to reassure the public that a plan is in place to reduce the deficit, and told the Heritage institute that government spending would be held in check.

Americans on the other hand are counting on export opportunities to grow as soon as Europe starts to rebound from its malaise, and are pushing China to introduce more flexible exchange rates that would reduce the competitive advantage that the Asian giant now has in export trade.

If China were to stop linking its currency rigidly to the dollar, the US trade deficit with China -- which holds the largest portion of the deficit pie -- would improve.

Taylor said he expected the budget deficit would slide under 3 percent of GDP this year, and down to 1.8 percent of GDP by 2009.

Wall Street remains optimistic for this year despite all the gloomy pronouncements. In a survey of the country's 70 most influential economists, the expectation is for an economic growth rate of 3.6 percent this year, Bloomberg financial news service reported.

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