I'm sure you have some basis for this statement. Please fill me in.
The first thing you should do is ask yourself why they're bad. Whatever your answer, prove it. Then continue reading below.
Contrary to popular belief, the trade deficit is not caused by unfair trade practices abroad or declining industrial competitiveness at home. Trade deficits reflect the flow of capital across international borders, flows that are determined by national rates of savings and investment. This renders trade policy an ineffective tool for reducing a nation's trade deficit. Our exports have been going up.
Trade deficits don't cause rising unemployment. Quite the opposite (what's the rate right now? Pretty damned good). Look at the chart below and notice that unemployment was highest when the trade deficit was lowest. We actually had a trade surplus in 1975 (boy those were the days). Notice how unemployment - the blue line - drops as the trade deficit grows, and vice versa.
None of the common concerns about the trade deficit holds up to empirical scrutiny. Trade deficits cannot be blamed for unemployment or slower growth, nor are they a sign of unfair trade practices abroad or declining industrial competitiveness at home.
In the final analysis, nations do not trade with each other people do. Every international transaction that Americans engage in will, by definition, leave both parties to the transaction believing they are better off than before - otherwise the transaction would not occur. By this measure, the "balance of trade" is always positive, benefiting the nation as a whole.
We're by far the richest nation on earth. Doesn't it stand to reason that the nation with the most money will have the most to spend?
9 posted on
05/14/2005 4:40:08 PM PDT by
Jaysun
(No matter how hot she is, some man, somewhere, is tired of her sh*t)