Understanding the deficit: the deficit is a function of trade balance

[HiPointDem]

The basic story is incredibly simple. If we are buying more from abroad than we are selling, this means that we have negative national saving. If we have negative national saving, then either the public sector must have negative savings (i.e. a budget deficit) or the private sector must have negative saving (we are investing on net more than we households and corporations save) or both must have negative saving...

To offset this gap we must have a large budget deficit. Alternatively, we can have the situation like what we had in the housing bubble years of the last decade or the stock bubble years of the late 90s when private investment exceeded private saving. In the last decade this was accomplished through the bubble-spurred housing boom and the near zero savings rate as people consumed based on their bubble-generated housing wealth.

Those who do not focus on the trade deficit, but nonetheless want full employment, either want large budget deficits or the negative private savings story seen in the bubble years. They may not understand this fact, but just like 2+3 being equal to 5, it happens to be true. There is no way around it.

The key to reducing the trade deficit is of course getting the dollar down. That will make our goods more competitive internationally.

This all is really simple, but it does require thinking for a moment or two. Repeating the Washington conventional wisdom gets one nowhere. (Okay, I don't mean that literally -- it can get you a high paying important job.) People actually have to think about how the economy works in order to understand it.

http://www.cepr.net/index.php/blogs/beat-the-press/the-secret-source-of-economic-weakness-the-trade-deficit

[FreakinDJ]

1. Finally - some one "Gets it"

[FogerRox]

2. But in the last century we had no trade deficit and a budget deficit prior to 1965

[HiPointDem]

3. Read it again:

If we are buying more from abroad than we are selling,
this means that we have negative national saving.

If we have negative national saving,
then either the public sector must have negative savings (i.e. a budget deficit)
or the private sector must have negative saving
(we are investing on net more than we households and corporations save)
or both must have negative saving...


If we have a trade deficit, we *will* have deficit in the private or public sector.

It doesn't mean that the reverse proposition is true (If we have budget deficit, we *will* have trade deficit).

[sabrina 1]

4. So, not that we did not know this, SS has nothing to do with the deficit.

[Supposn]

5. Reduce the trade deficit; increase GDP & median wage

Reduce the trade deficit; increase GDP & median wage

Warren Buffett’s concept to significantly reduce USA’s trade deficit.

It is not our global trade but our trade deficits’ that are a significant net detriment to our economy. Trade deficits’ are ALWAYS detrimental to their nations’ GDPs.

I’m a proponent of a proposal to reduce USA’s trade deficit of goods that was first introduced to the Senate in 2006. The market driven proposal does not favor or discriminate between foreign nations, or between manufactured, agricultural or any other industries’ products. It is self funding; eventually all expenses are borne by U.S. purchasers of foreign goods.

The basic concept is for exporters who choose to pay the federal fees to acquire TRANSFERABLE IMPORT CERTIFICATES, (ICs) for the assessed value of their goods leaving the USA. The fees defray all direct federal expenses due to this proposed policy.

Importers would be required to surrender ICs for the assessed value of their goods entering the USA. Surrendered certificates are cancelled.
These transferable Import Certificates may seem as a boon to exporters of USA goods but it’s actually an indirect and effective export subsidy.

The version of this policy I advocate is completely market driven, funded by U.S. purchasers of foreign good and excludes values of specifically listed scarce or precious minerals integral to goods being assessed.

This trade policy would significantly decrease USA’s trade deficit of goods and increase the aggregate sum of USA’s imports plus exports and our GDP more than otherwise. The GDP bolsters the median wage.

Wage earning families benefit from cheaper imported goods but every day of every year they’re dependent upon their U.S. wages. Regardless of how small the additions to imports’ prices due to Import Certificates, (unlike tariffs) USA’s assessed imports could never exceed that of our exports. USA consumers will be able to purchase cheap, (but not the absolute cheapest) imported goods. We cannot afford the absolute cheapest.

Refer to: www.USA-Trade-Deficit.Blogspot.com
or Google: “wikipedia, import certificates “.

Respectfully, Supposn

[FogerRox]

6. I must respectfully partially disagree

GDP is relaint on Productivity, energy, resources and population growth. The days of 6,8,10,12% growth are long gone. Most Keynesians agree 3 to 3.5% growth in GDP is all we can expect over 15 to 20 years.

Raising the median wage is fine by itself, but its no longer 1950 when America made everythying. Wage tends to occur when unemployment is held under 5% for an extended period of time. We have 23 million Americans who would take a full time yr rnd job if offered, to create 23 million jobs requires investment. The tax policies which incentivized domestic investment are long gone, we no longer spend 5% of GDP on infrastructure, we spend 2%.

Heres another take, wage growth could be flat, which serious job creation, and a tax policy that doesnt tax working and middle class familes out of the economy. It would require walking a fine line with policy, but should be doable.

Seeing real wage growth, enough to make the US the highest wage country in the world may not be the answer. But we do need to find a balance, job creation, middle class viability- etc.

[Supposn]

8. Reduce the trade deficit; increase GDP & median wage

Reduce the trade deficit; increase GDP & median wage.

Foger Rox, we should accept net improvement any way we can achieve it.
Among all existing or proposed economic concepts I’ve encountered, I have more confidence in this proposal for an Import Certificate, (IC) trade policy.

Years ago I deducted USA import and export statistics of price supported crops and categories’ of goods within which rare or scarce minerals predominately account for their values. USA’s annual trade deficit that year for all remaining goods then approached a half trillion dollars.
[The U.S. Department of Agriculture determines our federal subsidy to enable the export of U.S. price supported crops. The ICs behave as an export subsidy which the Agricultural Department could consider when they can reduce government spending for those particular exports.
The IC proposal adjusts assessments to exclude scarce or rare minerals within USA’s globally traded goods].

Trade balances’ affect upon the GDP are generally understated. All direct federal expenses due to the IC policy are voluntarily defrayed by exporters of U.S. goods. All the policy’s expenses are eventually borne by the U.S. purchasers of foreign goods.

Consider at no net federal expense an increase of USA’s GDP in excess of a half trillion dollars annually, no net federal spending, significantly decreased trade deficits and increased sum of USA’s aggregate imports plus exports.
Enactment of the IC trade proposal would definitely be beneficial to our nation.

Refer to: www.USA-Trade-Deficit.Blogspot.com
or Google: “wikipedia, import certificates “.
Respectfully, Supposn

[cthulu2016]

7. So raising taxes would narrow the trade deficit?