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Why does the U.S. always run a trade deficit?

libertystreeteconomics.newyorkfed.org

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Re: Why does the U.S. always run a trade deficit?

#771

Post by wkat4242 »

IG_Semmelweiss wrote: post #634
mrtksn wrote: post #115

Earlier quoted context omitted.

US doesn't just get political influence. It gets massive amounts of products and services enabling the US residents live well beyond their means. China for example, sends huge number of electronics and all kind of other consumer goods that Chinese produce by sweating in 12 hours shifts in 6 day work weeks in exchange for imaginary numbers. US is definitely not the victim here. There's the risk of this system stop wor…

Your statement would be true without nuance. Yes. The mass of US consumers do benefit from penny subsidies of certain foreign product. However, for every penny of foreign subsidy benefitting US consumers buying finished iron or steel goods, a US metallurgist is losing a job somewhere. On strictly numbers, we are better off with foreing-paid subsidies yes, but there are losers, and they take the brunt of the downside.…

> However, for every penny of foreign subsidy benefitting US consumers buying finished iron or steel goods, a US metallurgist is losing a job somewhere.

The US consumers can't bear the prices of US craftspeople anymore. Their purchasing power will drop so much that they would wish they still had the deficit and access to AliExpress. And nobody in the US will want to do factory jobs anymore. Really who wants to screw iPhones together all day every day for minimum wage? The few jobs on that category that are left are done by... immigrants. You know, the ones that Trump is kicking out. The ones that worked long hours to be able to live in the ghetto areas hoping in vain they'll one day benefit from the "American dream".

Re: Why does the U.S. always run a trade deficit?

#772

Post by s1artibartfast »

fakedang wrote: post #731
s1artibartfast wrote: post #714

Earlier quoted context omitted.

>.That requires intense taxation for a few years on the rich and corporations alike, and using those proceeds to pay it off. This is your bias and preference seeping in. Simply put, you need to balance your budget. The US already has some of the highest corporate taxes in the world. Most countries don't rely on them, and instead focus on the individual pass through profits. most European democracies tax the middle cl…

There are so many loopholes in the current tax system. And I say this as someone who benefits massively from the status quo. But like I said, where else can the govt get the cash to "balance the budget"? And again, European democracies aren't the ideal here when we're talking about balancing the books. Look to the American 1950s and the Clinton Era for better role models.

I'm pretty sure those included higher taxes on the middle class as well.

There are fewer loopholes than intentional features and shelters people don't like or don't understand

Re: Why does the U.S. always run a trade deficit?

#773

Post by s1artibartfast »

randerson wrote: post #608
alexey-salmin wrote: post #513

Earlier quoted context omitted.

They are separate but closely connected. Something has to cross the border in the opposite direction. Could be corporate stocks or bonds, could be government bonds. You can see export of government bonds as the last line of defense where the economy failed to produce enough of other instruments to cover the imbalance.

My understanding is that other countries who end up with those dollars from our trade deficit tend to invest those dollars in US financial institutions: treasuries being one form, but also US stocks and corporate bonds and so on. So the deficit indirectly helps anyone with a 401K, and also allows the government to keep borrowing money. But the trade deficit is mostly a private sector thing. It doesn't stop the govern…

>So the deficit indirectly helps anyone with a 401K, and also allows the government to keep borrowing money.

And hurts taxpayers and anyone who wants to buy stock, housing, or anything else that has been bid up.

You are right that budget deficits are a governmental problem independent of trade.

Re: Why does the U.S. always run a trade deficit?

#774

Post by monkeyfun »

wkat4242 wrote: post #771
IG_Semmelweiss wrote: post #634

Earlier quoted context omitted.

Your statement would be true without nuance. Yes. The mass of US consumers do benefit from penny subsidies of certain foreign product. However, for every penny of foreign subsidy benefitting US consumers buying finished iron or steel goods, a US metallurgist is losing a job somewhere. On strictly numbers, we are better off with foreing-paid subsidies yes, but there are losers, and they take the brunt of the downside.…

> However, for every penny of foreign subsidy benefitting US consumers buying finished iron or steel goods, a US metallurgist is losing a job somewhere. The US consumers can't bear the prices of US craftspeople anymore. Their purchasing power will drop so much that they would wish they still had the deficit and access to AliExpress. And nobody in the US will want to do factory jobs anymore. Really who wants to screw…

You're overall correct, but made me notice that there is actually an unusually coherent argument (by their standards) being presented by the reactionaries pushing for the things you mention. It goes roughly like:

>The reason these jobs are terrible is because immigrants are doing it for wages that would be intolerably low to anyone else.

>This is also why it's hard to find a decent job in general, our competition is basically cheating!

>But if we remove the immigrants, the employers will surely have to increase wages like they were supposed to

>Now americans will have high paying factory jobs, and if some goods increase in price that's ok, their wages will let them afford it.

>we got to have our cake and eat it too!

Obviously they're missing some key steps and consciousness here in the reasoning, but I feel it's interesting to reflect on in context of how it's almost right -- and surprisingly close to a marxist view of things until it starts assuming things like that individuals have more bargaining power than their employers or that economic agents will always try to set the lowest price they can afford for goods rather than the highest.

So for example they'd believe prices would only go up a little and manufacturing companies would just live with stagnant or reduced profits since they'd have no other choice.

Notice how they have a habit of assuming totally Good behavior from Companies but totally Bad behavior from Immigrants!

I think in context of all that, it becomes more visible both how we could actually resolve this problem other than by just accepting the loss of domestic industry, and what in specific the people falling for this narrative are being hooked on.

Re: Why does the U.S. always run a trade deficit?

#775

Post by UltraSane »

MaxPock wrote: post #660
IG_Semmelweiss wrote: post #634

Earlier quoted context omitted.

Your statement would be true without nuance. Yes. The mass of US consumers do benefit from penny subsidies of certain foreign product. However, for every penny of foreign subsidy benefitting US consumers buying finished iron or steel goods, a US metallurgist is losing a job somewhere. On strictly numbers, we are better off with foreing-paid subsidies yes, but there are losers, and they take the brunt of the downside.…

You might be losing as an individual but the country gains.

The gains need to be socialized.

Re: Why does the U.S. always run a trade deficit?

#776

Post by int_19h »

sorcerer-mar wrote: post #699
bumby wrote: post #698

Earlier quoted context omitted.

Sure, if you want to stop making cars to make weapons instead for a long period of time. Have you ever retooled a highly automated assembly plant? I have, and I can tell you it’s not something that can be changed on a whim.

Is your contention that we should be churning out wartime levels of war materiel when we're not at war? Like specifically what do you think we should be doing?

To chime back in, my contention is that we should be churning out at least enough to keep Ukraine fully supplied without the need to ration, and the fact that we still aren't there 3+ years into this war is not a good sign.

Speaking more broadly, I think that the proper amount of war-related industry should depend not just on whether the war is ongoing or not, but on how likely it is. Right now I believe that a major war that US will likely need to participate in sooner or later is more likely than not by 2050.

Re: Why does the U.S. always run a trade deficit?

#777

Post by sorcerer-mar »

int_19h wrote: post #776
sorcerer-mar wrote: post #699

Earlier quoted context omitted.

Is your contention that we should be churning out wartime levels of war materiel when we're not at war? Like specifically what do you think we should be doing?

To chime back in, my contention is that we should be churning out at least enough to keep Ukraine fully supplied without the need to ration, and the fact that we still aren't there 3+ years into this war is not a good sign. Speaking more broadly, I think that the proper amount of war-related industry should depend not just on whether the war is ongoing or not, but on how likely it is. Right now I believe that a major…

I don't think our "not being there" has anything to do with ability but with political appetite. If both political parties wanted to produce a lot of shells, we'd produce a lot of shells. Right now one political party wants Ukraine to lose, so we don't.

Otherwise largely agreed with your comment.

Re: Why does the U.S. always run a trade deficit?

#778

Post by coliveira »

fakedang wrote: post #623
StopDisinfo910 wrote: post #583

Earlier quoted context omitted.

Of course but the EU thinks it’s a better strategy to engage with China which remains a major partner to move the needle in the right direction rather than burn bridges. There are a lot of tools which could be used to limit the impact of Chinese surproduction and push China towards shoring up its internal market. The US used to do the same and will hopefully be sane again in three years.

Command economies hell-bent on economic dominance are not going to engage. The only way to limit Chinese super production is to either block their goods outright or to subsidize your own to out-price theirs locally. A lot of people don't understand the CCP mentality clearly. China was once the epicenter of human production, making things the rest of the world desired, from Chinaware to silk to tea. The rest of the wo…

> sat on their thrones and levied tributes from every farflung nation

You mean, like the US is now doing?

Re: Why does the U.S. always run a trade deficit?

#779

Post by 20after4 »

sorcerer-mar wrote: post #237
20after4 wrote: post #198

Earlier quoted context omitted.

It appears that the US mislead¹ Saddam Husein into believing that the we would not intervene in the border dispute with Kuwait. This was enough assurance for him to go ahead with the decision to attack Kuwait. That action was then used by the US as a pretext for the invasion of Iraq. 1. https://adst.org/2016/02/a-bum-rap-for-april-glaspie-saddam-...

What's the relevance?

Just that they maybe were looking for an excuse and weren't genuinely that concerned about Kuwait.

Re: Why does the U.S. always run a trade deficit?

#780

Post by motorest »

AnIrishDuck wrote: post #541
motorest wrote: post #538

Earlier quoted context omitted.

> Growth is trivial to achieve when you are starting from zero. China currently reports the second highest GDP in the world.

> For decades, China's GDP growth towered over the US's. It's much easier to 100x $1k than to 10x $1m. This is not to take away from the achievements of the Chinese economy, which are gargantuan. You just can't linearly extrapolate growth rates.

> It's much easier to 100x $1k than to 10x $1m.

China's GDP is the second largest in the world, and is around two thirds of US's. China's economy is growing continuously over 5% whereas the US already discussed facing a recession.

In some metrics, such as PPP GDP, China already towers over the US.

I think you're trying ver hard to diminish the second largest economy of the world at a moment where it's expected to be a few years until it's the single largest.

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