The Myth Busting Economist by Larry Malone
Should We Care About Trade Deficits?
Since it’s a presidential election cycle, we can expect that politicians seeking federal offices will be making hay about the size of our trade deficit. By the end of this column we’ll see that the only folks who should be making hay are the farmers finishing up the first cutting of the season.
What comes to mind when you hear the word “deficit?” The smell of irises and roses as we move through June and into July in gorgeous Central New York? No way! A glance at a thesaurus will list negative words like shortage, debit, scarcity, and insufficiency as synonyms. Such scarry words are why politicians love to rile up voters by chirping and pounding “trade deficit” into our heads.
What exactly is this presumably very bad thing called the trade deficit? It’s the difference between the dollar value of imported items (coming into the U.S. from businesses operating in other countries) and exported items (departing the U.S. from businesses operating in our 50 states).
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