The big-spending budgetary policies of George W. Bush and their implications for the US economy are yet to emerge as issues in this year's presidential election. But the freewheeling, perhaps even reckless, approach to fiscal management adopted by his administration is causing alarm bells to ring within international financial circles.
The International Monetary Fund this week expressed fears that the spiralling US budget deficit and growing trade imbalance - if not reined in - could spark a global financial crisis. Many analysts share the IMF's anxiety. With an eye on the elections, Mr Bush seems unlikely to shift from policies that entail a heady cocktail of heavy tax cuts and high levels of public spending. But as the US dollar continues to plunge in value amid concerns over both the budget deficit and the huge shortfall in the US current account, the danger signs are there for all to see.
The strategy is unsustainable. It is almost certain to lead to a painful U-turn in US fiscal policy, necessitating sharp tax increases, spending cuts and higher interest rates. At worst, there could be a collapse of global confidence in the US, prompting an international financial crisis of the kind that worries the IMF.
A significant chunk of the budget deficit can be attributed to the September 11 attacks and their aftermath. Military spending surged as the US embarked upon costly invasions of Afghanistan and Iraq. While spending has risen dramatically, taxes have been slashed. The inevitable consequence is that the budget deficit has mounted, hitting US$374 billion last year. And it is rising.
The trade imbalance poses another problem, with the US needing to attract billions of dollars in capital from overseas to finance the current account deficit. And there are emerging signs that the foreign governments and investors who usually provide these funds are beginning to lose confidence. There has been a slowdown in the buying of US debt, and the dollar is falling to record lows.
The implications for Asia of a collapse in the US economy would be far-reaching. While the weak dollar is helping combat deflation in Hong Kong, a crisis would hit the Asian export market - so important to the region's economic well-being. Mr Bush has failed to learn the lessons of history. Former president Ronald Reagan pursued similar policies, creating a huge budget deficit in the 1980s - and it took the US a decade to recover from it. The Reagan policies should have particular resonance with Mr Bush as they led to tax increases that contributed to the failed re-election bid of his father, George Bush.