The Economist Intelligence Unit expects the Democrats to win the next presidential and congressional elections in November 2008. Federal finances have improved, but there is limited resolve to tackle looming holes in healthcare and public pensions programmes. We expect the Federal Reserve (central bank) to cut its benchmark Federal funds target by 50 basis points by the end of 2007 in response to financial market turmoil. Real GDP growth is thus forecast to slow from 2.9% in 2006 to 1.9% in 2007 before rising slightly to 2.1% in 2008. The US dollar will depreciate further in 2007. The current-account deficit is forecast to narrow to around 5% of GDP in 2008.