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January 13, 2005
The U.S. trade deficit—the difference between what America imports in goods and services versus what it exports—hit a record high $60 billion in November with the cumulative deficit for the year now estimated to top a whopping $600 billion. The mounting trade deficit crisis leaves the U.S. dangerously dependent on the whims of foreign governments, like China and Japan, who feed America's insatiable private and public borrowing. Treasury Secretary Snow talked up the trade deficits, stating that his takeaway from the numbers is that "the economy is growing, expanding, creating jobs." What does the trade deficit mean for you?
- Mounting trade deficits mean fewer jobs. With so much money tied up in financing debt accumulated from trade there is less capital available for other investments, thus lowering overall economic growth. This means fewer jobs for Americans. A new study by the Economic Policy Institute reveals that, over the last 15 years, the trade deficit with China alone has cost America 1.5 million jobs. Job losses are not just in "labor-intensive industries like textiles and apparel" but also the "high-tech arena" where America was expected to maintain some competitive advantage. For the past two years, the U.S. has already seen rising deficits in advanced technology products, reaching a record of more than $5 billion in November 2004.
- Mounting deficits mean higher gas and oil prices. America is buying large amounts of oil overseas, a major contributor to the trade deficit. As our reliance on increasingly scarce and volatile foreign oil grows, prices for consumers will surely rise in the wake of higher oil prices. Yet the Bush administration refuses to make significant investments in steps to alleviate the problem, like renewable energy, and instead focuses on insufficient and environmentally destructive domestic drilling plans.
- Mounting deficits mean your economic future lies in the hands of foreign governments. The largest chunk of the trade deficit in November – $16.6 billion – came from the Chinese. Part of the reason is that China fixes the value of its currency, the yuan, to the dollar. That means U.S. goods are more expensive that they should be in China and Chinese goods are cheaper than they should be in America. The solution would be to convince the Chinese to revalue their currency against the dollar, so that it more accurately reflects the true value of their economy. But since the Bush administration is so reliant on Chinese financing for its massive budget deficits, it is not in any position to force the Chinese to solve the problem. Consequently, your economic future is in the hands of incompetent politicians in Washington and creditors and central banks in foreign nations.
Daily Talking Points is a product of the American Progress Action Fund. |
Daily Talking Points is a product of the American Progress Action Fund. |
