ABSTRACT
After the party conventions conclude in August, it can be expected, or at least hoped, that the presidential campaigns will turn to substantive issues like economic growth, employment, wages, taxes, and trade. To the extent that domestic savings fall short of domestic investment, the economy must import more than it exports. So, if the savings-investment balance is negative, then the economy's trade balance will also be negative. The importance of this relationship transcends that of the balance between federal government expenditures and revenues—that is, the budget deficit. The budget deficit is one among several factors influencing the savings-investment balance. Other factors include the absolute amount of government spending, tax and regulatory incentives to save and invest, monetary policy, and demographics. The expanded tax base that such a change in marginal rates would create is likely to minimize the resulting reductions in revenue yields, and perhaps to avoid such reductions entirely.
