The above-linked segment aired on “CBS This Morning” today, reporting that Finland is one of the best places in the world to have a baby because of the low infant mortality rate and the fact that, on average, the medical bill is only about $60. Why? The story highlights higher taxes in Finland which fund their socialized health care program. Finns don’t seem bothered. In the U.S., if the government raised taxes enough to fund a health care program similar to Finland’s, many Americans then couldn’t put food on the table.
I bring this up because it’s worth considering how balance of trade factors into the equation. In 2017, Finland enjoyed a $4.4 billion surplus of trade with the U.S., which accounts for approximately 80% of its surplus of trade with the rest of the world as a whole. That may not sound like much, but in per capita terms the surplus is almost $800 per person, or $3200 per family of four. That’s how much money the U.S. injects into their economy through trade. The rest of the world injects about a quarter of that, or another $800 per family of four, for a total of $4,000.
Now consider the U.S., which has a trade deficit with the rest of the world of about $720 billion. In per capita terms, that’s a deficit of about $2,200 per person, or $8,800 per family of four. That’s how much the trade deficit sucks out of the U.S. economy. And that’s how much the federal government needs to inject back into the economy through deficit spending – much of which is accomplished by under-taxing its citizens.
The trade deficit makes Finn families $4,000 richer and makes American families $8,800 poorer. It’s as simple as that. That’s why Finland is able to afford a health care system that Americans can only dream of, or that older Americans can remember from decades ago when company-provided health care that required almost no out-of-pocket expense was a benefit that virtually all working Americans expected.
“Wait a minute,” you may be thinking. When we talk about the trade deficit, we all think of China, and maybe Japan and Germany. But Finland? How do we have a deficit with Finland? Well, for starters, in 2017 we imported $1.14 billion worth of cars from Finland. Can you name what brand of car is imported from Finland? I doubt it. All of them are Mercedes-Benz’s. Finland’s Valmet Automotive manufactures Mercedes models under contract with Mercedes. How many cars does America export to Finland in return? In 2017, we exported only about $32 million worth of cars. To put that into perspective, we import 20 cars from Finland for every car that we export to them.
Our next biggest import from Finland is pharmaceuticals – about $0.7 billion worth in 2017. How much pharmaceuticals do Finns buy from us? About $47.8 million in 2017 – only one fifteenth of what we buy from them. And on it goes across hundreds of categories of products.
Finland is merely one tiny example of how balance of trade matters – how a trade deficit drags down our economy and our standard of living while boosting them in other countries. But no one ever explains it to the American people because it’s too complicated a subject to be covered in a five minute story on “CBS This Morning,” or in a 60-second story on the evening news.
I wonder how many people who complain about the sorry state of health care in America are also those eager to lambast Trump for trying to get tough with our trade partners, not understanding the connection? Is it any wonder that we’re in such a mess?