The perversity of the United States

The United States has very significant public spending needs (innovation, defence, infrastructure renovation, improvement in social welfare, the education system, energy transition, etc.) and faces great difficulty in raising taxes, for political and ideological reasons. The result is a structural fiscal deficit that turns into a structural external deficit because of low private-sector savings in the United States. And this external deficit is being financed by attracting savings from the rest of the world to the United States. The resulting highly inefficient international capital flows (global savings finance the country with the highest per capita income) are therefore a consequence of US governments’ inability to raise taxes to the level needed to finance public spending.