[Jaysun]

Then why do we get larger and larger trade deficits?

The whole idea that a "trade deficit" is a bad thing is nonsense. 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.

One reason that our "trade deficit" is higher is that we have a hell of a lot more money to spend than anyone else does. That's not a bad thing.

I would argue that a "trade deficit" is a good thing. Trade deficits signify growing consumer demand and expanding investment opportunities. Indeed, those that advocate a smaller trade deficit should first realize the following:

*Industrial production in the United States has climbed steadily in the past two decades during a time of historically large U.S. trade deficits.
*Larger trade deficits correlate positively with FALLING unemployment. As an expanding economy creates jobs, it also creates demand for imports and for capital from abroad.

[ninenot]

One reason that our "trade deficit" is higher is that we have a hell of a lot more money to spend than anyone else does.

Actually, it's because we have a hell of a lot more DEBT than anyone else.

What happens when (not if) the value of housing drops?

And it will: net after-tax earnings, CPI-adjusted, continue to decline.