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  • Good News: Reporters Link Bigger Trade Deficit to Stronger Economy

    Kenichiro Seki/ZUMA Press/Newscom

    Kenichiro Seki/ZUMA Press/Newscom

    The government just announced that the trade deficit for May increased by $400 million.

    Usually, the media report announcements of bigger trade deficits as bad news, accompanied by mistaken assertions that trade deficits are a drag on the economy. But this time, some reporters got it right.

    According to Reuters: “In another sign of improving domestic economic conditions, the U.S. trade deficit widened sharply in May, as stronger U.S. demand pulled in more imports, a report from the Commerce Department showed.”

    And according to the Associated Press: “But economists noted that the wider deficit does show growth in the United States remains stronger than most other nations. That growth has helped fuel more spending by consumers on domestic and imported goods.”

    Recent reports on Japan’s trade deficit made a similar connection: “Economists told CNBC that they expected Japan’s trade deficit to widen in May, adding that they forecast a surge in imports to reflect a marked improvement for the world’s third largest economy.”

    There is no evidence of a link between wider trade gaps and restrained growth. In fact, Heritage Foundation research demonstrates that the U.S. economy has grown faster in years when the trade deficit increases than when the trade deficit declines. The fact that reporters are beginning to get the story right is good news.

    Posted in Economics [slideshow_deploy]

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