Categorized | Trade

China to be #1 Economy in 2030? It Doesn’t Have to Be That Way.


Let’s look at why balancing trade is, by far, the biggest positive thing lawmakers can do for the economy.  And why China does not, but for our stupidity, have to surpass the U.S. as top economy.

The National Intelligence Council just released a report stating that China will be the number one world economy in 2030.  The U.S. will be number two, but energy independent (because of energy production gains in the last few years).

What they don’t say is what would happen if we balanced trade.  If we balanced trade, it would be the equivalent of a $6 trillion stimulus over 10 years.  That’s very, very, very, big.  That dwarfs any government stimulus spending (tax cuts) and may keep the U.S. economy on top globally.


Our trade deficit is a reduction in aggregate economic demand.  This year’s deficit will be about $600 billion.

Keynesian stimulus spending is used to kick-start the economy by injecting aggregate demand into the economy via government spending.  Both parties agree on stimulus, even though they don’t say they agree.  Generally, and I’m caricaturing a bit, Dems like stimulus via civilian and infrastructure spending and the GOP likes stimulus based upon military spending and tax cuts.  All say that their stimulus will create jobs.  (There are number on what type of stimulus works the best, but that’s not my point here).

The 2008 recession was a contraction of GDP.  A reduction of aggregate demand for the goods and services produced by the country.

Obama’s 2009 stimulus was $837 billion over 10 years (not in one year, as some seem to assume).  It included both tax cuts and spending.

But if we balanced trade, that would be the equivalent of $600 billion per year in stimulus… i.e. an increase in aggregate demand for U.S. goods and services.  Over 10 years, that is a massive $6 trillion.

That stimulus would cost the government no added spending.  Instead, it would produce tremendous new government revenue, thus enabling us to run (quite probably) budget surpluses.

That is why CPA member companies often say they could double… yes double… the number of their employees if they had a fair shot at the domestic market without foreign country predatory trade practices.  No other policy change can remotely touch that benefit.

Thus, the “fiscal cliff” discussions and all the other problems and solutions being discussed by those Very Smart People in DC… are borderline irrelevant.  Maybe “irrelevant” is too strong, but certainly they are not remotely as important as balancing trade.

For a visual presentation, you can see the trade deficit chart below.  If we eliminated all that red, we would have had so much production and employment, we would not have had a 2008 recession.  We could pay wages, buy goods, pay into retirement funds, build infrastructure, etc.  That red is a reduction in aggregate demand for U.S. goods and services that helped cause the recession and our slow growth.


One Response to “China to be #1 Economy in 2030? It Doesn’t Have to Be That Way.”

  1. Harry Moser says:

    Michael, great article!
    Everyone who works for or sells to a manufacturing company can directly help reduce the trade deficit by urging their employer or customer to make more objective sourcing decisions. Much of the offshoring occurred because companies looked only at wages or prices and not total cost. The Reshoring Initiative’s free Total Cost of Ownership software helps corporations calculate the real P&L impact of reshoring or offshoring. Current research shows most companies can reshore about 25% of what they have offshored and improve their profitability.
    About 10% of the approx. 500,000 manufacturing job growth since the low in January 2010 is due to reshoring. Based on the 309 published reshoring articles in our Reshoring Library, we calculate that at least 50,000 manufacturing jobs have been reshored.
    I was one of the business experts in Pres. Obama’s Jan 11, 2012 Insourcing Forum. I emphasized, and the assembled executives supported, the need for companies to more consistently utilize TCO analysis instead of price variance in making their sourcing decisions.
    You can reach me at [email protected] for help using our tools for sourcing decisions and when selling.


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Ian Fletcher’s: “The Conservative Case Against Free Trade”

Ian Fletcher’s “Free Trade Doesn’t Work”