…while America is running a trade deficit, this deficit is smaller than it was before the Great Recession began. It would help if we could make it smaller still. But ultimately, we’re in a mess because we had a financial crisis, not because American companies have lost their ability to compete with foreign rivals.
But isn’t it at least somewhat useful to think of our nation as if it were America Inc., competing in the global marketplace? No.
Consider: A corporate leader who increases profits by slashing his work force is thought to be successful. Well, that’s more or less what has happened in America recently: employment is way down, but profits are hitting new records. Who, exactly, considers this economic success?
The trade deficit is like the regular deficit is like your weight problem: it won’t kill you right away, and it’s definitely a problem, but it can be dealt with…eventually. Obviously the trade deficit can be sustained for as long as foreigners are willing to finance our spendthrift ways, and ending that soon would be only slightly less disastrous for those foreign lenders than it would be for us.
And of course it depends on what, exactly, we mean by competitiveness. Are we just cutting jobs? That’s a bad idea for the economy. Does it mean substantially reducing health care costs, which would certainly allow American workers to compete with European ones more effectively? If so, that’s probably a good thing—depending, as always, on how you go about doing that substantial reduction. Does increasing competitiveness mean repealing goofy regulations? (For example: America is not competitive on tourism regulations. You have to get all sorts of visas and get fingerprinted, etc., etc. and surely this means that fewer people visit America and spend their cash money here than they would prefer.) If so, good! And so on…