The Forgotten Deficit

A. Scott Piraino

Last year the United States posted a trade deficit of 489 billion dollars, a new record high. Our cumulative trade deficits since 1980 add up to over four trillion dollars. That’s the second largest transfer of wealth in history, second only to our national debt.

Nowhere is this transfer of wealth more apparent than in East Asia. Over the last twenty years growing trade surpluses with the US have fueled an unprecedented economic expansion. In key industries such as computers, electronics, and automobiles, the US is now dependent on Asian imports.

Even last year’s trade gap doesn’t tell the whole story. Our merchandise trade deficit totaled a whopping 549.4 billion dollars. This larger deficit was offset by surpluses in agriculture and “services”, a very broad category that includes tourism and foreign student tuition.

What happened to our country while we traded food, vacations, and college degrees for goods, and lost four trillion dollars in the process? While the Pacific Rim was booming, corporate downsizing, factory closures, and mass layoffs became an economic way of life for American workers. Per capita incomes have soared throughout the Pacific Rim, while wages in the US have stagnated.

Even the record economic expansion of the 1990’s failed to raise hourly pay for Americans. Our wages have been squeezed by the loss of millions of manufacturing jobs since 1980. Those jobs have been replaced, but with lower paying work in the service sector.

Now even those service sector jobs are leaving the United States. The evidence can be seen in the rapid growth of “outsourcing”, or transferring information jobs to foreign nations. US service industries such as finance, healthcare, and software development are rapidly expanding in lower wage nations. As this trend continues, these high-tech careers are being exported just as manufacturing jobs have fled in the past.

Despite the preponderance of evidence that we are losing a trade war, Protectionism remains out of fashion in the United States. Our political establishment refuses to connect our trade deficits with stagnating wages and a beleaguered middle class. Instead voter’s insecurities are assuaged with vague promises of prosperity in an emerging “global economy”.

Our national managers assure us that free trade will raise our standard of living. Technology and information industries will link the world into one giant market for goods and services. Expanding markets overseas will create millions of jobs for American workers.

But this begs an obvious question. Has the global economy created our trade deficits, or have our trade deficits created the global economy?

The world is wealthier than ever because the world has spent our money, four trillion dollars of it. For some parts of the world the global economy means new investment, new jobs, and rising prosperity. For Americans globalization is a kinder, gentler word for the export of jobs, factories, and technology. A small elite of investors and multinational corporations profits most from the global economy, while the American people sacrifice their incomes to create it.

So what is the true cost of our trade deficits? It’s how much wealthier we would be if the economic boom that enriched East Asia had enriched our country instead. Ultimately, it’s the difference between America today, and the America that could have been if we had spent four trillion dollars here instead of exporting it.

Published on February 1, 2006 at 12:36 am  Leave a Comment  

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