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  • Does the United States Really Have a Trade Deficit?

    Kenichiro Seki/ZUMA Press/Newscom

    In 2012, $3.4 trillion came into the United States through trade and investment, and $3.4 trillion left, according to the Bureau of Economic Analysis (BEA). Every dollar Americans sent to people in other countries was balanced by a dollar sent back to the United States: 64 cents for U.S. exports, 22 cents for payments to U.S. investors, 11 cents for investment in U.S. assets, and 3 cents on other transactions.

    There was no deficit.

    So why do critics complain about the trade deficit? The reason is that they only look at dollars spent on things like shoes, and not dollars spent on things like factories. Based on transactions in T-shirts, the U.S. has a deficit. Based on investment income, the U.S. has a surplus. Add up all the individual deficits and surpluses, and they balance out.

    Even if the U.S. did have a trade deficit, it wouldn’t matter, since there is no evidence that trade deficits are bad for the economy. All that really matters is protecting people from special-interest trade barriers that drive up prices and make Americans poorer.

    Posted in Economics [slideshow_deploy]

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