The linked article is about Dr. Peter Morici, professor at the University of Maryland and former International Trade Commission economist, who bucks the trend of globalization cheerleading economists and sees our trade deficit for what it is – “… an enormous drag …”
Since Dr. Morici hasn’t read my book yet (as far as I know), he still believes that the deficit is due to currency manipulation, especially by China. So he hasn’t come around to my theory that the deficit is actually due to disparities in population density between the U.S. and nations like China, but at least he acknowledges that the deficit is a real problem.
The $62.2 billion July deficit reported Thursday by the U.S. Commerce Department amounts to economic opportunity shipped abroad, Morici said in a statement.
“Simply, money spent on Middle East oil, Chinese televisions and coffee markers, Japanese and Korean cars can’t be spent on U.S. made goods and services, unless offset by a comparable amount of exports,” he said.
“Since U.S. imports exceed exports by more than 5 percent of GDP, the trade deficit creates an enormous drag on demand for U.S.-made goods and services. Along with the credit crisis and resulting slowdown in new housing and commercial construction, the trade deficit is driving up unemployment,” he said.
But I draw your attention to this article because of the very last paragraph:
Morici estimated balanced currencies would cut the deficit in half, increase the gross domestic product by $300 billion and restore 2 million U.S. manufacturing jobs.
I find it very interesting that he still believes we’d have a significant deficit (it would only be cut by half) even if there was no currency manipulation. Whether or not we agree with his estimate of how much it would be cut, if at all, this seems to be a tacit admission that there is still something else at work causing the deficit. If he sees a huge benefit to be realized by cutting the deficit in half – increasing GDP by $300 billion per year and restoring two million manufacturing jobs – then isn’t it logical that these benefits could be doubled by eliminating the remaining half of the deficit as well? Obviously! GDP would increase by $600 billion and four million manufacturing jobs would be restored.
If Dr. Morici believes that currency manipulation is only half of the problem, then it would clearly be worth our while to figure out what’s causing the other half and to take action to correct it. Well, if you’ve read Five Short Blasts or if you’ve been following this blog, you already know the cause and know what needs to be done. The trade deficit will never be eliminated until we extract compensation from overpopulated nations like Japan, Germany and China for their inability to provide access to a market equivalent to ours. Yes, this means tariffs, indexed to their population densities.
But, again, at least there’s economists out there who recognize the damage being done by misguided trade policies. Teach your students well, Dr. Morici. We need a whole new breed of economists.