All this economic “talk” leaves me in a state of confusion, because there are far too many variables, exceptions and time lags to sort out the long run effects. On the bottom line I retreat back one simple premise, “No matter how good the prize appears to be, over the long run, you can’t get something for nothing.” Trading intangible dollar credits for tangible goods has the scent of the classical “chain letter.” Our economy seems to be one big chain letter backed by many other chain letters. Those holding the infinite number of intangible credits depend upon an infinite exponential growth of chain letters, which is a statistical impossibility.
The premise that there is no free lunch has likewise helped me to see through similar "chain letters". There are policies where the benefit is certainly worth the cost. But policies where there is absolutely no cost are extremely rare, if they exist at all. One free lunch that comes to mind is the myth that income tax cuts completely pay for themselves.
In any case, I agree that the trade deficit has a real cost. The only question is whether or not we can afford that cost. If we were simply spending a portion of the wealth that we were creating, that would be fine. But I suspect that we are, in effect, spending down past wealth that we inherited from prior generations. Time will tell.