America’s unfunded obligations have become infamous around the world. We have an outstanding national debt of over $11 trillion (more than half of which was accumulated by the Bush administration alone). We have unfunded entitlement payments to social security, Medicare, and other national programs which David Walker – former Comptroller General of the United States – estimates to be in excess of $50 trillion. We have consumer debt which has seen Americans take out roughly $9 trillion in credit and home equity stakes in the past decade.
However, there is another menace facing the United States which is almost completely overlooked: the trade deficit.
Every American knows that the U.S. government runs multibillion dollar budget deficits every year, but very few realize that the trade deficit is just as high as the budget short falls. During the Bush administration the government accrued an estimated $5.6 trillion in budget deficits, but over that same time period the economy accrued an additional $4.8 trillion in trade deficits.
The United States has not witnessed a positive outcome from international trade since 1976. In 1970, 1973, and 1975 the United States economy gained money via international commerce, in every other year from 1970 to present the economy has lost money. Over the past four decades the total lost by the United States is roughly $7.1 trillion.
We cannot sustain a growing economy if it loses money at the end of every fiscal session. According to AmericanEconomicAlert.org the trade deficit through just a few short months of 2009 is already over $185 billion. If the previous yearly deficits of $711, $753, $700, and $681 billion since 2005 are any indication, we should expect another year of incredible losses for the United States.
Obviously the economy has grown precipitously since the 1970s; there is more money in the system today than ever before. However, that does not mean there is more real value. The increase in the money supply is largely due to inflation more than any other factor. Since leaving the gold standard in the mid-1970s the Federal Reserve has been pumping dollars into the system faster than they could count.
Meanwhile, the top of the economic pyramid has accumulated more and more wealth in what could be the largest shift in income and earnings in history.
The fundamentals of this economy are not strong. It favors the rich and ignores the poor, it borrows money which it cannot pay for, it allows major tax loopholes to be executed by clever elites while the low to mid-level wage earners have to pay extra every April – as if the government didn’t already tax them enough.
The government can always find ways to make it seem like the economy is growing when it really isn’t. But the trade deficit does not lie. A country with a balance of trade surplus is growing (see: China, Japan, Canada, European Union, etc). A country with a balance of trade deficit is not. And no country in the world carries a deficit like the United States – no five countries combined carry a deficit like the U.S.
We need to address the deficit immediately and with decisive action. It is the vehicle through which most countries acquire our currency, which they then use to buy out our remaining valuable assets. It is the vehicle which has created the economic monster that is China, and has allowed despotic potentates to oppress the masses in oil rich nations around the world. Most importantly, America’s trade deficit represents job losses on an unparalleled scale in the manufacturing sector.
If we continue to let this continue unabated, it will bleed us dry. If we hope to survive as a nation, we have to institute energy, import, and manufacturing policies which boost employment and domestic production, while lessening the outflow of our jobs and our capital overseas.