“Trade Deficit” Understanding Deficit

With the Democrats controlling Congress, we’re going to be hearing a lot of complaints about the “trade deficit” and attempts to address it with legislation.

Whenever americans trade, they become wealthier. Trade is good. The trade deficit is not debt, and it’s not a problem. If anything, it’s a sign of the health of our economy and its attractiveness to foreign investors.

There is debt involved, but most of it is caused by the government spending too much; not by americans buying too many foreign goods and services.

Of course, there are often some people who are temporarily worse off because of some specific trades. These effects occur whenever people change their buying habits. Are we going to outlaw that, too? All human action has consequences. We shouldn’t stop doing things that make us all better off, generally, because some people won’t be able to carry on exactly as they had before!

You can learn all you need to know about this by reading Don Boudreaux’s February 2006 TCS Daily article, or his recent letter to Lou Dobbs, or his many great blog posts on trade.

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