The Trade Deficit

Oh dear:

Congressional Democrats called on Tuesday for the Bush administration to develop a comprehensive plan to reduce the record U.S. trade deficit, including action against what they called trade barriers and unfair trade practices in China, Japan and the European Union.

"We ask you again to join us and develop a meaningful action plan that addresses the burgeoning deficit," House of Representatives Speaker Nancy Pelosi and other senior Democrats said in a letter to President George W. Bush.

The call followed a Commerce Department report showing the U.S. trade deficit widened 6.5 percent in 2006 to a record $764 billion. That included bilateral gaps of $233 billion with China, $117 billion with the EU and $88 billion with Japan.

"To begin with, therefore, we call upon the administration to present Congress within 90 days a comprehensive plan to eliminate the surging trade deficits with these 'Big 3' economies," the Democrats said.

Left unsaid is that U.S. exports are actually growing -- and that these deficits are a symptom of a healthy economy.

Malpass, one of Wall Street's most astute economists, suggested we look at job growth as one measurement. "Since the 2001 recession, the U.S. economy has created 9.3 million new jobs, compared with 360,000 in Japan and 1.1 million in the euro zone, excluding Spain. This despite our trade deficits and their trade surpluses."

Significantly, like the United States, Spain, which created 3.6 million new jobs over this period, and Great Britain, which added 1.3 million jobs, all ran trade deficits. But job creation wasn't hurt and wages were rising solidly in all three countries.

If our elected representatives would focus on the budget deficit instead of the trade deficit we might actually be getting somewhere. But instead they would rather worry about how we spend our money -- after all, our purchases of foreign goods (like my new Sony TV) is what drives the trade deficit -- than how they spend our money.