The US Is Focusing On the Wrong Deficit

The focus in Washington is on cutting the US budget deficit.  That is the wrong target if we are interested in producing jobs.  If we cut our trade deficit by 2% it would produce around 2.8 million jobs.  This article suggests some of the things that might be done to cut the US trade deficit.

It may be politically difficult to cut the US trade deficit because a large share of the trade deficit is the result of imports by US firms that are sold under their brand name in the US.  If we don't do something about the trade deficit, however, we can't cut our budget deficit without making things worse in the US.  Our budget deficit adds some the lost spending, which is about $500 billion per year, from our trade deficit which is about 3% of GDP.  For the last decade we have been using government spending, and investment bubbles to compensate for our large trade deficits.

The Obama Administration has a goal of doubling US exports by 2015 but that is the wrong target.  The trade deficit reflects net exports in the US.  That is exports minus imports.  We need to increase net exports.