CAC1001 said:
Well I don't think we want a positive trade balance. There is a misconception that a trade "deficit" is bad, and that a trade "surplus" is a good thing. But those are just the terms. It's like how some believe a "strong" dollar is good and a "weak" dollar is bad. There is nothing wrong with a trade deficit. It is a sign of the country's wealth and prosperity. It has been shrinking as of late because the country is not prospering right now. It always tends to shrink during bad recessions. It is a sign of poorer country when it exports more then it imports. It is a sign of a wealthier country when it imports more then it exports; also, a good chunk of the U.S. trade deficit is due to importing oil.
Then it would appear that the US is not as wealthy as many perceive. One solution to the trade deficit would be to significantly reduce oil imports and replace by domestically developed resources, e.g., natural gas (assuming it can be done without polluting the environment, particuarly drinking water supplies), wind, solar, hydro and nuclear energy.
Remember, during the Great Depression, the U.S. ran a very tiny trade deficit and a trade surplus for some of the years of the Depression. The trade deficit is just the result of the millions of voluntary exchanges that take place between businesses and individuals within the U.S. with businesses and individuals outside of the U.S. Such voluntary exchanges will not occur unless both parties benefit in the process.
A tiny or intermittent deficit would not be necessarily bad or problematic - IF there was a corresponding surplus.
I agree on the budget deficits. But remember there's a difference between a budget deficit and a trade deficit. The federal government doesn't control the trade deficit. That is just the result of the market. They could try to influence it maybe by trying to increase or decrease free trade overall, but otherwise, it's just the natural play of the free market. Whereas a budget deficit, the government directly controls that to a good deal. Short-term budget deficits due to a recession the government doesn't control, but in general, if the country is running constant deficits, even in good times, then the government is spending too much money for what it takes in in tax revenues.
The federal debt/deficit is structually linked to the trade deficit (which are substantial, not tiny). The trade deficit represents money leaving the US economy, significant loss of tax revenue, significant expenditures to cover the unemployment associated with the job loss, . . .
The money associated with the trade deficit is invested in those countries from which the US imports. Some of that money is then spent on US exports, e.g., aircraft, military hardware, technology, etc. But a subtantial amount of that money is lent back to the US. Chronic deficits lead to accumulated debt/obligations. Defaulting on debt is problematic because of the loss of confidence in the process.
You mean divide it up among the American people? That would create a whole slew of problems I would think. Certain politicians and pundits would start yelling it is unfair to make the guy making $30K a year pay the same debt load as the guy making $300K a year, and we'd have more class warfare. Also, remember some of the debt is owned by the American people themselves! The debt doesn't need to be paid off, it just needs to be reduced.
I indicated equitable division. The person earning $30 K might pay $1K, while the person earning $300K might pay $10K. Basically, the federal debt is owned by the people - it is money borrowed in the name of the American people.
This itself may not even really require paying down the debt, so much as returning the country to a healthy level of economic growth and running a constant balanced budget. This way, as the GDP increases, the debt, as a percentage of the GDP, will shrink year-after-year. If it is viewed that the debt is too large to the point it is hamstringing achieving a healthy level of economic growth, I could see paying it down some perhaps.
The debt has to be paid down, because it is unmanageable as it is! The economy/GDP has rarely, if ever, grown at the rates required to reduce the debt, i.e., eliminate the deficit. Supposedly it did during the latter years of the Clinton administration. Modern US federal deficits have exceeded 8% of GDP, and in 2010 it was about 10% of the GDP. The GDP growth is rarely above 5%, and more recently has been around a rolling average of ~3%.
http://www.tradingeconomics.com/united-states/gdp-growth-annual (adjust the beginning of the scale to 1948)
However, the GDP growth should be adjusted for the federal deficit, and I believe that it is not. Buried in the GDP is the US government expenditures, which have become increasingly laden with deficits. Subtracting the government deficits from the GDP would give a more realistic assessment of the state of the US economy. And I believe one will find it rather poor.
but it would be real interesting to see both the names & faces of the clients who paid for this rating report... i.e. if "global hell" breaks out on Monday...
