THE UNITED STATES' current account deficit with the rest of the world widened ominously in the spring quarter. The figures, published a couple of days ago, show the deficit at a record $9.7 billion for those three months--an annual rate of nearly $40 billion. The chief reason was that this country's imports of merchandise were rising and its exports were not.
Over the past decade, the United States has generally run a substantial deficit in merchandise trade, but it has been balanced by the incoming profits on services and investments that Americans earn abroad. But now, because of the high exchange rate of the dollar, both accounts appear to be headed toward unprecedented deficits.
On this subject, we take the opportunity to correct an error in these columns yesterday. The chairman of the president's Council of Economic Advisers, Martin Feldstein, suggested that the merchandise trade deficit--and not, as we had it, the current account deficit --might possibly go as high as $100 billion next year. A trade deficit of that magnitude implies a current account deficit of $70 billion or more. The largest in the past was $15 billion in 1978.
The point, unfortunately, remains the same. Just as a federal budget deficit exerts pressure toward faster growth of the whole national economy, a current account deficit presses in the opposite direction. The current account deficits that the country is now experiencing, let alone those in prospect, are large enough to affect the recovery from the recession--and not for the better.