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To: yard_man who wrote (32)	5/4/1998 9:59:00 AM
From: Henry Volquardsen	Respond to of 3536

Mornin' Barry, Whether the budget balance is temporary is indeed an interesting question. The cynic in me believes the politicians will not be able to restrain themselves and will start deficit spending shortly. However to answer your question I will say this, if nothing changes the US will start running budget surpluses and the prospects for significantly reducing the outstanding national debt is very good. The economy is very strong and generating a lot of revenue. Also the low level of interest rates is helping. The big qualifier in that statement is if nothing changes. Possible changes are a significant slowing of the US economy, tax cuts or spending increases. I feel confident the economy will keep up its end of the bargain. I am hoping for a lot more sex scandals to keep the politicians at each others throat instead of fiddling with taxes and spending. Yes Europe has high taxes and unemployment. And over time there is reason to question how flexible they will be in terms of monetary policy. But a growth spurt is a short term affair. The creation of the Euro and the low interest rates that it will bring to peripheral Europe (Spain, Italy etc) will definitely cause a growth spurt in Europe that will increase imports from the US. In my post to which you were responding I used capital flows to distinguish investment flows as distinct from trade flows. My point was that a trade deficit would not have to weaken a currency if domestic policy measures made the currency a sufficiently attractive investment environment for foreigners to invest in that currency despite the excess being generated by the trade deficit. Yes the services are included in GDP but I don't have percentages off hand but will try to look them up. Henry