Remember last month, when the decline of the trade deficit to $56.8 billion was ballyhooed as evidence that the falling dollar was beginning to reverse the deficit? Well, barely mentioned in the release of the July deficit is that the June deficit was understated by $2 billion. Oops! This is typical game-playing by the government – releasing phony data that gets headlines and lots of attention, and then quietly revising it the following month when no one even notices.
This linked Reuters article reports on the July trade deficit, which widened to $62.2 billion, a 16-month high. All of the emphasis in the article is on the deficit in oil and on gains in exports. Nowhere is it mentioned in the article that the overall deficit in goods hit an all-time record in July of $74.9 billion. Nowhere in the article is it mentioned that imports of goods hit an all-time record, more than off-setting the rise in exports. (Imports of goods rose $8.1 billion from June, while exports rose only $4.5 billion.) You’d have to go to the Census Bureau web site to find these hi-lites. Here’s the link:
Yes, the non-oil goods deficit declined to about $30 billion in July, a significant decrease from the $38.5 billion rate it had been running in 2006. But the decrease is not due to a rebound in domestic production. Domestic manufacturing activity continues to decline. Rather, the drop in the non-oil goods deficit is due to the overall slow-down (recession, actually) in the economy. Relying on recession to improve the trade balance is not the right way to go about it!
But none of this detail is included in the news reports. Instead, what the globalization cheerleaders feed us is a lot of happy talk about rising exports, hoping you’ll forget that exports are meaningless if you don’t also consider imports. It’s the overall balance that matters. Look at your bank statement. Do you just look at deposits and get all warm and fuzzy? Of course not! You go right to the bottom line. If it’s gone down, then you start reviewing debits to see where your money went. The trade deficit is the same thing. Exports are deposits. Imports are debits. It’s the bottom line that matters.
At least at the end of the Reuters article, there’s a quote by one U.S. senator that “gets it.”
“That just can’t continue. It weakens our economy, reflects the movement of U.S. jobs to China and creates mounting debt that must be paid,” Sen. Bryon Dorgan, a North Dakota Democrat, said in a statement.
Let’s hope this sentiment begins spreading across Capitol Hill. It’d better, because he’s exactly right. This nation has been completely bankrupted by our trade deficit, and it can’t go on much longer.