uments presented by the functional government arbiter, the Congressional Budget Office. In its July 15, 1998 white paper budget projection for the years 1998 to 2008, the CBO made several predictions.
According to its summary, the growth of the "nation's real GDP is likely to slow to 2 percent for the rest of calendar year 1998 and early 1999, down from the 4 percent pace set during 1997 and the first quarter of 1998" (The economic and budget..., 1998, 12). Factors contributing to the slowdown include a continuation of the recent increase in the real trade deficit, a pickup in inflation, and weaker profits (Adams, 1998, 12).
Demand for U.S.-produced goods and services has been dampened by events overseas. The economic contraction in Asia stemming from that region's currency crisis was the major reason for the slowdown in demand, but an already strong dollar and the slowly growing demand in Europe also contributed to stagnating real exports and accelerating import growth (Murray, 1997, A1).
The outlook is for continued strength of the dollar and weak demand growth overseas, which make it likely that foreign trade will continue to depress demand for U.S. goods into 1999.
The underlying rate of inflation--the increase in the consumer price index (CPI) excluding energy and food prices--is forecast to rise slightly over the next year and a half because of strong upward pressure on wages and a partial dissipation of the factors that have been dampening price growth for several years: "Growth of the overall CPI on a year-over-year basis was 1.7 percent in June 1998, but that measure is distorted by the sharp drop in petroleum prices in 1998. The underlying rate of inflation was 2.2 percent through June, 1998" (The economic and budget..., 1998, 19). CBO's forecast assumes that the underlying rate will increase slowly to 2.7 percent by the end of 1999. Because energy prices are expected to remain steady (Adams, 1998, 12),...