Saturday, February 11, 2006

Roy Blunt Likes Record Deficits

Last year the US trade deficit reached an all-time high for the fourth consecutive year. And Rep. Roy Blunt thinks that's just dandy.

Blunt's web site includes this statement:

America’s economy is strong and growing at a robust pace, and today the president provided a blueprint to keep headed in that direction. Our economy prospers when Americans are allowed to keep more of what they earn and to save and spend as they choose.

And Americans love to buy foreign goods, according to the Commerce Department:
The record flow of foreign goods into this country has given consumers a wide array of choices at low prices, helping to keep a lid on inflation. But critics contend the trade deficits have contributed to the loss of nearly 3 million manufacturing jobs since mid-2000 as U.S. companies moved production overseas to lower-waged nations. Many economists believe those manufacturing jobs will never come back.

''America's gargantuan trade deficit is a weight around American workers' necks that is pulling them into a cycle of debt, bankruptcy and low-wage service jobs,'' said Richard Trumka, secretary-treasurer of the AFL-CIO.

When Americans buy imports, foreigners must do something with the dollars they earn. They can either use the dollars to buy American exports or to invest in American assets, such as Treasury bills, stocks, real estate, and factories. But if foreigners suddenly decide they want to hold fewer U.S. assets, they could send the value of the dollar, stocks and bonds all plunging.

Trade deficits are not necessarily bad. Nor are they necessarily good. But with the Bush administration's willingness to not tax but still spend and thus increasing the national debt to record levels, the record trade deficit may become a very big problem.

Don't worry, though. Roy Blunt says everything is just fine.