NCPA - National Center for Policy Analysis

Would U.S. Economic Slowdown Spread Globally?

January 22, 2001

Some experts fear that deteriorating economic conditions in the U.S. could affect other regions of the world. Asia is facing a fragile recovery, parts of Latin America are struggling, and Europe may not have the strength to take up the slack.

The U.S. economy is much more integrated with the rest of the world than it was even as recently as the 1990-91 recession.

  • The U.S. accounted for 30 percent of global growth over the past three years -- even though our economy represents only 20 percent of world gross domestic product.
  • Trade -- which accounted for only about one-fifth of U.S. economic activity a decade ago -- now comprises almost 30 percent.
  • The 2,500 largest U.S. companies sold about 12 percent of their goods and services outside the U.S. in 1980 -- a figure which has tripled in the past two decades.
  • Economists say the world's economies are much more synchronized today than they were 10 years ago -- so whatever happens here will have an almost immediate impact in other countries.

Many experts agree that quick passage of President Bush's across-the-board tax cut, coupled with a significant reduction in capital gains tax rates, could turn the looming recession into a modest dip. Such moves would surely be welcomed by other countries, not to mention U.S. taxpayers.

Source: James Cox, "U.S. Slowdown Would Ripple Around Globe," USA Today, January 22, 2001.

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