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The part where you lost me was with "Do you believe that every year from 1976 to now was more prosperous than every year from 1896 to 1970 and that, judging by our current record deficits, we are now approaching economic nirvana?"

Where to begin. Aw heck, I can't imagine you or anyone else ever wanting to live like they did back in the 1800's --I personally know people who do and-- it ain't pretty. How about you and I try and agree on an index of prosperity for comparing standards of living in 1896 with today lifestyles--- nah, can't happen.

Following is the definition of prosperous as given by the Merriam-Webster Online Dictionary:

1 : AUSPICIOUS, FAVORABLE
2 a : marked by success or economic well-being
  b : enjoying vigorous and healthy growth : FLOURISHING

I am of course using definition 2b. In terms of wealth, at least that wealth that results from technology, we are naturally better off now than we were in 1900 and will almost surely be better off in 2100 than we are now. But, in terms of growth, every year from 1976 to now was obviously not better than every year from 1896 to 1970. Likewise in those terms, your statement that "the bigger the trade deficit, the better off we are" is obviously not true.

in terms of growth, every year from 1976 to now was obviously not better than every year from 1896 to 1970....

Maybe posting stuff in the wee hours of the morning is a bit like singing while drunk -the subjectively sensed quality gets a much higher rating than that from other people's evaluations.

Recent economic growth "not better" than before? The average expansion of the economy from 1896 to 1970 was $14 billion, and from 1970 to now it's been $350 billion. That's in current dollars. In 2000 dollars it's $47 bill. versus $225 bill. Over all average % real growth was a fraction of a percent higher in our nation's formative years, but averages are pointless in view of the fact that day to day and year to year life was pure chaos. Early growth used to range up to +19% one year and -13% in another.

I say we're far better off now, but it doesn't matter. None of this pertains to the topic. We were talking about the record high trade deficit and whether it matters. We have agreed that by itself, the trade deficit isn't important. "During a recession, people spend less on goods and services, including imports." We don't have to agree on whether the 'good old days' were better than the modern era.

We can take the rest of the year off and have fun with our families --cheers!