FINC 356International FinancePh5 (IP)Write a 1200 word paperAccording to the Congressional Research...

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FINC 356International FinancePh5 (IP)Write a 1200 word paperAccording to the Congressional Research Service article:	“Is the U.S. Current Account Deficit Sustainable?”	(http://assets.opencrs.com/rpts/RL33186_20100402.pdf):America’s current account (CA) deficit (the trade deficit plus net income payments and net unilateral transfers) rose as a share of gross domestic product (GDP) from 1991 to a record high of about 6% of GDP in 2006. It began falling in 2007, and reached 3% of GDP in 2009. The CA deficit is financed by foreign capital inflows. Many observers have questioned whether such large inflows are sustainable. Even at 3% of GDP, the deficit is probably still too large to be permanently sustained, and many economists fear that the decline is temporary and caused by the recession.The U.S. account deficit (in U.S. dollars) is illustrated in the chart below:Write a 900	–	1200 word paper concerning the U.S. current account. Your paper should be organized as follows:· Paragraph One: What is a current account deficit? Specifically, what does it mean that the U.S. is running a current account deficit? How does a current account deficit benefit U.S. citizens? How does a current account deficit hurt U.S. citizens?· Paragraph Two: What offsets the current account deficit? What are the implications for the U.S. of this off setting account? How does this offsetting account (i.e., surplus) benefit U.S. citizens? How does this offsetting account hurt U.S. citizens?· Paragraphs Three and Four: What are the two main causes of the U.S. current account deficit since 1991? In paragraph three, describe one of the causes and why it has occurred and in paragraph four, describe the other cause and why it has occurred.· Paragraph Five: In your opinion, is the U.S. current account deficit sustainable? Why or why not? (Note: this last question is purely your thoughts about the subject	–	there is no right or wrong answer to this question).PS: please used at least 3 to 5 references at least

Robert · Accepted Answer

Current Account Deficit & its Implications 
There is little 
agreement between 
Democrats and 
Republicans on the 
future fiscal path, and 
both are seeking to 
define the political landscape for the budget talks. In early April, Democrats in the Senate forced 
a symbolic, and unsuccessful, vote on the so-called Buffett Rule—named after a high-profile 
billionaire, Warren Buffett—that would ensure that millionaires pay a minimum tax rate that is 
higher than most current effective tax rates for extremely high earners. For their part, House 
Republicans have begun the process of proposing US$261bn in cuts to mandatory spending 
programmes, including funding for financial regulations and food stamps for the poor, and have 
also approved a US$46bn tax cut for companies with fewer than 500 employees. Neither bill is 
expected to move through the Democratic-controlled Senate, but they will serve as political 
markers for the post-election fiscal debate. 
Key elements of the fiscal cliff include the end of the George W Bush-era tax cuts, which 
will expire at the end of this year, and more than US$100bn of automatic budget cuts that are set 
to kick in at the same time, for a total of about US$600bn in fiscal contraction. Republicans want 
all of the Bush tax cuts to continue, whereas Democrats would extend only those on incomes 
below US$250,000. Republicans are hoping to redirect the thrust of the expected spending cuts, 
which are currently set to hit defence spending disproportionately. However, in several rounds of 
negotiations, congressional leaders and the president, Mr Obama,

FINC 356 International Finance Ph5 (IP) Write a 1200 word paper According to the Congressional Research Service article: “ Is the U.S. Current Account Deficit Sustainable? ”...

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