In a long article in The Atlanti called “The Quiet Coup”, former IMF Chief Economist Simon Johnson writes about his experience bailing out financially failed governments. While the articles theme revolves around how the financial industry oligarchy in the U.S. is a major barrier to fixing our problems, author Simon Johnson points out the the obvious.
But I must tell you, to IMF officials, all of these crises [in many countries over many years] looked depressingly similar. Each country, of course, needed a loan, but more than that, each needed to make big changes so that the loan could really work. Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut… .
The Very. Smart. People. in DC are debating the fiscal budget issues. But the core of the “living beyond our means” problem is the trade deficit. We imported about $500B more than we exported in 2012. That means we consumed about $500B more than we produced. Boehner and Obama don’t talk about our basic, destructive, and massive net import problem.
If we balanced trade, then we (a) would staunch that net outflow of money, jobs, innovation and growth; (b) we would gain a very large amount of tax revenue from the new wealth and income; and (c) we would bring unemployment way down.
Then Commerce Secretary Gary Locke said in 2012, when promoting “exports”, that “for every $1 billion in exports, 6,250 manufacturing jobs are created or supported.” The converse is true also. We lose 6,250 jobs for every $1B in imports.
Since net imports were $500B in 2012, we had 3.12 million fewer jobs than if trade was balanced.
And Bureau of Economic Affairs data is clear that our 2011 trade deficit caused Gross Domestic Product to be 4% less than it would have been with balanced trade.
We need a War on Trade Deficits.