Is the Trade Deficit a Drag on the U.S. Economy?

Popular opinion demonizes the U.S. for importing more goods than it exports, or running a “trade deficit.” This view maintains that the trade deficit is costing jobs and slowing economic growth. “The $600 billion annual deficit is the most significant barrier to achieving a robust economic recovery and creating jobs,” charges a recent column. Yet this popular understanding, which is based on an incomplete assessment of the trade equation, is wrong. The prevailing view assumes that exchangingU.S.currency for foreign goods leaks money out of circulation. The reason for this confusion … More

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Trade Deficit Increases. . . or Does It?

The U.S. Bureau of Economic Analysis (BEA) just announced that the country’s current account deficit for 2011 was $473.4 billion. This number includes transactions like exports and imports. Cue the “sky is falling” headlines. However, the BEA did not point out that the overall U.S. international transactions deficit was $0. That means the number of dollars leaving the country and the number of dollars entering the country in 2011 balance out. Clearly explaining this information might reduce the number of inaccurate reports on the trade deficit’s impact, such the Associated … More

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