Can the growth in the U.S. current account deficit be sustained? How does the flow of deficits feed the stock of debt? And how will the burden of servicing this debt affect future deficits and economic growth? These are some of the questions we address in this Strategic Analysis. The U.S. current account deficit has been steadily growing since the early 1990s. By the end of 2005, it stood at almost 7 percent of GDP. The deficit increased from $185.4 billion in the third quarter of 2005 to $224.9 billion in the fourth quarter (BEA 2006b). For the year, the U.S. current account deficit increased over 20 percent, from $668.1 billion in 2004 to $804.9 billion in 2005. After years of current account deficits,U.S. foreign liabilities now exceed U.S. foreign assets by nearly $2.5 trillion. Yet, despite the deterioration in the U.S. position, income on foreign assets almost matches the income on foreign liabilities. Because net income flows to the United States remain neutral, the burden of servicing the external debt appears inconsequential to some. But appearances can be misleading.We take issue with the view that just because income flows are currently neutral, there is little reason for concern. If interest rates continue to rise, the current account deficit will continue to worsen. In this Strategic Analysis, we examine views on the effect the currentaccount deficit and the net international investment position of the United States will have on future growth. We focus on the cost of funding debt and the structure of U.S. assets relative to U.S.