All is not well with the most powerful economy of the world – the US economy. If the budget presented by the US President is anything to go by, the US economy looks well-set for a hibernation longer than what was originally apprehended about. It sticks out a mile when the President in his budget speech called upon the Americans to live within their means and save and spend. After living beyond the means for a long time, the results of leading such an existence has finally started visiting upon the lives of Americans. What is so striking about this budget is that it has ballooning deficit of nearly 11% of Gross Domestic Product which itself is a record after the Second World War. If the budget deficit of $1.4 trillion in 2009 is taken into account the picture takes on frightening character. The public debt of the only Superpower left in this planet is matter of great concern for the entire world.

Although the budget proposes significant cuts in spending, such cuts do not apply to whatever is proposed to be spent on defense which has been kept at $900 billion and added to it is another $520 for inland security. Apart form this he proposed tax increases for the wealthiest Americans and he rolled back some of the tax cuts and concessions granted by the previous administration. How he manages to bridge this existent huge deficit gaps would be a matter of great interest for the economist all over the world. The US is faced with the question of who is going to finance this huge debt. According to a report at least 45% of the debt issuances in 2010 would emanate from USA and India and China accounting for 3% each. The foreigners funded $800 billion out of $1743 billion in 2009.

What is important here to note is that the revenue growth which alone can succeed in narrowing down the deficit gap, has taken a beating in recent times. If one judges the performance of years when Bill Clinton was President, it would be pretty clear that the American economy struggled to keep the growth rate of revenue recorded during his terms in office which was 7.1% each year. During Bush's presidency the figure dropped to 3.6%. With the recession severely hitting it, the question that may tempt one to ask is: Is America heading for a debt trap? .