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  • Federal Spending and the Trade Deficit

    In 1987, President Ronald Reagan explained the relationship between federal spending and the U.S. trade deficit:

    “Here in the United States, we must restrain government spending. Our trade deficit in goods and services reflects that, over the past several years, we have spent more than we have produced—and we have spent too much because of the profligacy of the federal government. As the Congress reviews my proposed 1988 budget, it should remember that a vote for more government spending is a vote against correcting our trade deficit.”

    Today, the government released data that illustrate President Reagan’s point. The federal government sold $654 billion in Treasury securities to foreign citizens and governments in 2010 to finance its excessive spending.

    If the government did not have to sell so many Treasury bonds to foreign buyers, they would have more dollars available to spend on U.S. exports and to invest in the U.S. private sector. This problem is nothing new. As ABC News reported in a 1985 story on U.S. trade policy (above):

    The most basic problem is agreed to be the budget deficit. But nobody here seems able to do anything about that.

    Reagan was right. Instead of blaming other countries for the trade deficit, politicians should reverse the big-spending policies that helped create it.

     

    Posted in Economics [slideshow_deploy]

    3 Responses to Federal Spending and the Trade Deficit

    1. Brian says:

      My first log-on to The Foundry and plan to enjoy many more. However, in the main story you quote Reagan's warning of excessive spending. But during his terms in office, that administration's budget was larger each year than any in US history, only to be exceeded by the elder Pres. Bush and then doubled by Georige W. In the past 30 years, the largest budgets were completely by Republicans, except, of course, for Obama's first 2 years in office. I believe we need to research the reason WHY we increased our spending so greatly, list them to the public by amount spent and then address each of those issues. If the GOP continues to attack SS and Medicare (not that these don't need to be addressed) there will be a huge price to b e paid at election time by the large and very active group of Baby Boomers. It's been said that people who don't learn by what history teaches us are bound to repeat their mistakes………………and the cycle starts anew.

      • Mike Brownfield Mike Brownfield says:

        Brian,

        Thanks for joining us on The Foundry. We hope you enjoy it.

        Mike Brownfield
        Editor, Foundry.org

      • Mike Brownfield Mike Brownfield says:

        Brian,

        Thanks for joining us on The Foundry. We hope you enjoy it.

        Mike Brownfield
        Editor, Foundry.org

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