Posted on 01/22/2014 10:02:34 AM PST by 1rudeboy
The Treasury Department recently reported that China and Japan are the largest foreign holders of U.S. government debt. China now owns $1.317 trillion in U.S. government debt. Japan owns another $1.186 trillion. It is no surprise that China and Japan are also the two countries with which the United States has the largest annual trade deficits. Here’s why:
When Americans import a product made in China or Japan, those dollars can be used to purchase U.S. exports (benefiting Americans), to invest in the U.S. private sector (also benefiting Americans), or to help finance federal budget deficits (benefiting Americans by lowering our government’s cost of borrowing).
If people in China and Japan used all the dollars they earned from exporting goods to the United States to purchase U.S.-made products, the trade deficit would be zero.
But when they use those dollars to buy U.S. Treasury securities, the United States winds up with a trade deficit. Americans may benefit from those purchases, but sales of Treasury bonds don’t count as exports.
The trade deficit today, as in 1985, has very little to do with foreign trade barriers, currency manipulation, or “unfair” trade practices. The trade deficit is driven by U.S. politicians who have borrowed trillions of dollars from China, Japan, and other countries that could otherwise have been invested in American industries or spent on American-made goods and services.
As ABC News reported in 1985, “The most basic [trade] problem is agreed to be the budget deficit. But nobody here seems able to do anything about that.” In this regard, little has changed in the past 29 years.
The budget deficit is a result of the trade deficit.
And the trade deficit does have to do with trade barriers, or more accurately the lack of trade barriers. We lowered the tariffs in the 1960s and that resulted in a flood of cheap imports that drove American businesses out of business, or drove them to off-shore their products.
The result is that Chinese are employed and Americans are not. That drives the budget deficit deficit because now we have to support 100 million Americans on food stamps, medicaid and other support programs. And we no longer get income tax revenues from those Americans working. And states and local communities no longer get sales tax revenues because those Americans no longer have much to spend.
That would be an interesting argument to make, if you can prove it.
Let's isolate this line from the link so the outrage of the FR protectionists can run rampant without having to hurt their brains by reading the entire article.
And let me be the first to say bring back American jobs now!
I remember reading somewhere that the trade deficit is at a four-year low (largely because of fracking). I wonder how government spending has done over the same period . . . if there is a correlation, it should be down, right?
The trade deficit = debt crowd should be here shortly. Maybe not.
Gee Danny there you go using common sense again.
You have demonstrated that Free Trade has categorically failed.
It’s supporters cannot prove it works.
If Trade Deficits were a good thing, as the statist Free Traders claim, Africa would be the economic powerhouse on the planet. Instead, most of them still pee and poop in their potable water
Ok, thanks. The problem can be solved by giving Obama more of my money. I hadn’t thought of it, that way.
Wait, it does work for the stock holders of a few specific corporations, it works to support the ChiComs government, and it supports business school professors that teach this snake oil. Everyone else is a loser - unless you think saving 3 cents on a dollar is worth the social costs of 100 million unemployed.
I believe Nigeria has a trade surplus of billions of dollars. Do you want to move there?
So if I spend $1.03 for every $1.00 I spend now, 100 million will find work? You sound like a politician.
Job exporting companies use the reduced labor cost to affect costs & profits and the saved labor cost is exported to the government. Taxpayers pay in increased costs for the product or increased costs in taxes. Which is the most costly for the country?
You might consider that exporting jobs has ruined the SS system because the workers and owners pay no SS tax.
The protectionist mind remains an eternal mystery.
Are you saying that if we manufactured EVERYTHING we consumed ourselves that the number of unemployed in the USA would be unchanged from 100 million?
Now that directly points at the nut of the argument, here. Is the SS system ruined because some jobs were "exported," or because someone spent the SS money?
It's mind-boggling, in a way. Raising taxes will induce our politicians to spend less money.
I suppose we shouldn't be surprised by this kind of thinking. It comes from people who believe sporting a consistent trade surplus correlates with quality of life. That's why so many people are eager to move to places like Nigeria, Venezuela, Libya, Uzbekistan, Iran and Angola.
And that was the thing about Willie—I don’t object to trains, just how they are funded. Why do some conservatives (and I understand that Willie wasn’t) run to the government to fix things, while simultaneously observing that the government has broken things?
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