The US economy currently reflects a decade of economic prosperity and growth. Whoever the next president of the US is, experts agree, he will face a sputtering of this economic expansion. A number of economists now say that a recession in 2001 is possible. The projection for growth next year is 3 per cent, the lowest since 1995.
What does it all mean? The bulk of the US budget goes towards Social Security, Medicare and Medicaid. The latter two are healthcare programmes for the elderly and the indigent. Combined with Social Security, they comprise 7.5 per cent of the Gross Domestic Product in 2000. The challenge ahead lies in the number of baby boom generation Americans who are ageing and will soon tap into the Medicare and Social Security systems; by 2040, some 16.7 per cent of GDP will go towards those programmes. And even the most optimistic projections for growth cannot sustain those systems.
The answer will probably be taxes, and nothing is a more volatile political issue. Taxes for the average family now stand at their lowest in a generation. For a family of four with the median income of $59,000, (about €65,000), federal income and payroll taxes taken together are at their lowest point since 1978, according to US Treasury Secretary Mr Lawrence Summers. Federal taxes alone are at their smallest share since 1966. Most Americans pay between 15 and 39 per cent of their incomes into the tax and Social Security systems.