Record US Trade Deficits Spell Impending Economic Defeat

AmericanEconomicAlert.org ^ | Thursday, February 17, 2005 | William R. Hawkins

[Nathan Zachary]

" We built our economy on tariff revenue." I remember those days. That's when we had a relatively stagnant economy. taffifs are bad. period.

[Edit35]

Seriously, you will never convince the fools on this forum this is problem until its too late.

Our largest import in terms of dollars is OIL.

You know, that stuff which we distill and then put in our cars and SUV's so we can take the kids for a drive to the ice cream stand.

Seriously, the bulk of our trade defecit is due to our large need for energy. Cut our oil imports and our trade defecit drops, if I'm not mistaken, to the point where it about evens out with the goods and services we export around the world.

All this talk about defecits causing our demise is simply chicken-little talk.

Most of the money exported goes to OPEC countries which in turn plows it back into US and global companies through the stock markets.

[Nathan Zachary]

oops, tariffs are bad, period.

[cotton1706]

So you're saying that a one to two percent tariff on selected imports will cause such conternation in Europe and Asia that it will cause such companies to collapse or go out of business. A lot of nations in Europe subsidize their industries so that the prices of their products are lower than ours and yet there's nothing we can do to equalize or prevent this. We're just supposed to take it.

[Willie Green]

You are conveniently forgetting to mention that when imports (which are subtracted from GDP) are purchased, the value of the purchase is ADDED to consumption in GDP, so in the net there is no loss to GDP.

Production creates wealth.
Consumption diminishes wealth.

If you produce more than you consume, you get wealthy.
If you consume more than you produce, you go broke.

What don't you understand about that?

[1rudeboy]

A lot of nations in Europe subsidize their industries so that the prices of their products are lower than ours and yet there's nothing we can do to equalize or prevent this.

Hello? Do you follow the WTO at all?

[John Lenin]

He's baaaack

[cotton1706]

No I do not. We need oil for our defense. I'm for drilling our own oil and decreasing the regulations that make oil so expensive here. Then we can sell it to our own people at a lower price than what we could import it for. This would lower the trade deficit on that score. How can forieign nations purchase our oil when we don't make much and it's too expensive.

[1rudeboy]

So you're saying that a one to two percent tariff on selected imports will cause such conternation in Europe and Asia that it will cause such companies to collapse or go out of business.

No that's not what I'm saying. But I should add that your lack of concern about raising taxes (after all, that's what tariffs are) is troubling, and frankly, not very conservative.

[Nathan Zachary]

Oil is an imortant "good" that is imported, and not for just the gasoline factor. It's used in manufacture of many many products. it's the main, and biggest part of our "trade deficit" which we turn around and make into exportable goods, even the plastics we then ship over to China so they can make bumber covers for cheap chevys.

[You Dirty Rats]

I'm for getting rid of the income and corporate taxes. We survived for 150 years with tariffs as the main source of revenue. And we can make money on the so called "trade deficit". We did in the past and we can again.

There's no level of tariff that would cover our expenditures even if they were significantly reduced, which isn't going to happen in the foreseeable future. As much as I dislike personal and corporate income taxes, tariff are even worse for interfering with economic efficiency. If a tariff was proposed by the Right, the Left would sign on to it and spend the money on more dubious programs.

[Protagoras]

Another whacko article from a two bit website.

[Huck]

By all accounts, we should be speaking Japanese right now based on what the doom and gloomers were saying in the 80's.

That' s true. I remember seeing the cover of National Lampoon magazine in 1989/90 and it said Welcome to the 90s with a big grinning Asian man behind a desk extending a handshake.

[Nathan Zachary]

Here's an example of what your 1-2% tarif can do.

lets say I have an operation that takes a raw material which isn't available in the USA, I refine it and send it over to anther operation I have in the USA, where is is used in the final making of a finnished value added product. I then sell that product not only in the USA, but back to the country where I got the raw material from.

You want to put a tarif on that product? Then I will have to close the USA plant and make the whole product out of country. That's the impact even as much as a 1-2 % tax can have. No way am I going to give up 1-2 million is real money just because of protectionist policy, to protect what? From what? myself?

[hermgem]

Willie, we went through all sorts of announced future disastrous phases.
Recall the time when you couldn't attend a meeting without getting scared of the upcoming interest rate jump that kills it all.
There were full page ads in the NYT informing the public. These informericals were signed by a whole slug of scientists, economists, Nobel winners, and as a crown jewel the Democratic economic saint Mr Rubin confirmed this.
Then came the scare of a growth economy without the need for people. One self appointed economic expert and candidate promised 10 million new hires, but belittled and berated a sitting President when he announced 2 million new jobs in 2004. No apology by critics for exceeding these 2 million new jobs, just stepping to the next dooming disaster.
It's the deficit.
In my humble mind, a deficit has to be in relation to the total size of business, in this case the GDP, or Gross Domestic Product. And here, we find it to come down from the 3.6% it was 6 months ago.
Compare the U.S. with Germany, the third largest economy worldwide.
These people have a 3.6% deficit but not coming down, no it's going up, besides a 12.1% unemployment rate, still going higher.
Wouldn't it be silly not to have a declining and only 5.2% unemployment rate, and pumping unemployment onto the European plateau by radically jacking up taxes and attempting to pull down this deficit radically that is the support of staying employed.
If employment continues rising, the deficit automatically keeps diminishing along with economic growth.
No scare tactics needed, just keep watching what's happening by staying on course.

[Toddsterpatriot]

If you produce more than you consume, you get wealthy. If you consume more than you produce, you go broke.

God knows I hate to agree with Willie, but he's right.

From his post #1:
Gross domestic product (GDP)............................. $11,728.0 billion
Net exports of goods and services........................... -609.3 (-5.19% of GDP)

So by Willies logic, we produced over 19 times in GDP what we consumed in net exports.

[cotton1706]

When was this "relatively stagnant" economy? When we went from a coastal farm nation to an industrial world power in less than a hundred years? Or during the post Civil War period when he had surpluses every year for thirty years? Or during the 1920's when we paid down the debt, lowered spending and slashed income taxes?

[rcocean]

Yep.

Them there numbers are crazy.

Anyone who thinks different is craaaazy.

Massive deficits are good. Massive illegal immigration is good. A falling dollar is good.

Anyone who thinks different (ie. Japan, China, Korea, the EU, the rest of the world) - why, there just plumb CRAZY!

[roaddog727]

I'd have to look, but for the past 50 years I think that we have never not had a trade deficit.

[roaddog727]

I'd have to look, but for the past 50 years I think that we have never not had a trade deficit.