The economy will be a difficult and important issue for President Bush to tackle in his second term. Perhaps the biggest concern in the financial markets is the deficit in the government finances. This report from Andrew Walker:

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It is a striking contrast with the situation before Mr Bush came to power. Then, the federal government had a surplus. It was spending less than it received in taxes and there was even speculation that most of the national debt might eventually be repaid.

The subsequent deterioration is partly due to the slowdown in economic growth that was already underway when Mr Bush moved into the White House. But he has added to the shift into deficit with tax cuts and increases in spending in a number of areas, notably security.

For his second term, he has proposals which, on their own would add further to the deficit. He wants to make permanent tax cuts that are due to expire, and he wants to reform social security in a way that most economists think will add to its cost during a transitional period. So how will he achieve his aim of halving the deficit?

The economy is now growing quite strongly and if it continues to that will help. But his main effort is likely to be to control spending. With security related expenditure likely to continue being a major cost it will be hard work to bring borrowing down by half.

Andrew Walker, BBC

Listen to the words

a striking contrast with
very different from

a surplus
an excess of revenue over spending, money left over

speculation
a statement not based on hard facts, a guess

national debt
what the government owes

subsequent
which happens next

slowdown
decrease

deficit
the amount by which a sum of money is too small

a transitional period
a period of change

expenditure
spending

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